So much for the strength of the rally we have seen on global markets in the past day or so.
It well and truly ran out of steam in the US overnight and as a result, our market looks like starting with a savage 80 point plus fall at the opening this morning, instead of the rise many traders would have expected after yesterday’s 2.1% surge.
Yesterday’s surge in markets around the world was triggered by talk in China of a “proactive fiscal policy” promised by the Chinese government (ie, more government spending), and suggestions in Tokyo that Japan’s government was looking to cut company taxes (the proposal had been announced previously, but that was ignored).
The surge continued from Asia into Europe where it started brightly, but then slowed and then vanished in the US where market ended the session in the red by more than 1% for all three major measures.
The Dow shed 1.45%, the S&P 500, 1.39% and the Nasdaq lost 1.14%, despite Apple’s launch of its new IPhones, Watch and Apple TV, plus several other new developments.
As a result the overnight trading on the ASX 200 futures market saw an 85 point fall by just after 7 am. And the Aussie dollar retreated to back under 70 US cents, after the more than 1.5 cent run up in yesterday’s market hysteria.
Gold plunged $US16 to $US1,105 in late New York and early Asian trading, a fall of more than 1.4%, while US oil futures shed 3.8% to $US44.10 a barrel in early Asian dealings.
The 7.7% gain on Today’s Nikkei index, the biggest one day rise since the GFC in October 2008, will be reversed today.
Japan’s frenetic rise and the solid day in Shanghai infected markets across the region.
Our market jumped by 106 points, or 2.1% in the wake of Tokyo’s surge. Shanghai was up 2.9%, and Hong Kong jumped more than 4%. Big rises were also seen in South Korea and Taiwan’s markets.
Markets in Europe were also up more than 2% as well, but eased to close between 0.3% and 1.8% higher.
The rally had all the hallmarks of a combination of a dead cat bounce and relief rally as investors denied the reality of the situation in the US. That turned out to be the case and the retracement today will not be nice.
So all eyes will be on the Chinese markets once again, and Tokyo because that’s where yesterday’s gains were driven from.
