Another weak start for the Australian market is ahead for today after one of the worst weeks for equities around the world this year, certainly since the mid-year sell-off.
Adding to the nervousness will be any spillover in fear from the terror attacks in Paris on Friday night, French time.
That will hit sentiment across Europe hard tonight, especially in France and Germany where trading opens from 6pm onwards, Sydney time.
The AMP’s chief economist, Dr Shane Oliver wrote yesterday that the events in Paris provide a terrible reminder of the terror threat posed to countries participating in the efforts to combat IS.
"Terrorist attacks are horrible in terms of their human consequences and my thoughts are with those affected. In terms of the impact on financial markets, there is no doubt that the attacks in Paris will contribute to short term investor nervousness.
“But the experience with various Al-Qaida related attacks last decade is worth recalling: after an initial negative impact share markets bounced back as it was clear that there would not be a major economic impact and it seemed the effect on markets weakened as the terror threat continued.
“It only took just over a month for the US share market to recover from its 12% post 9/11 slump and it took the UK share market 1 day to bounce back from its 1.4% fall on the day of the July 2005 London bombings,” Dr Oliver wrote in a special note.
The ASX 200 futures market was showing a 37 point fall at the close on Saturday morning – on top of the 3.1% slide last week. The terror attacks will add to the uncertainty for local investors.
The Aussie dollar however remained stoically above 71 US cents at the close at the weekend, despite the continuing strength of the greenback.
Friday saw a spate of selling, especially among the big losers for the week – miners and commodity related stocks here and retailers in the US.
The Australian market shed 1.5% or more than 74 points on Friday, or nearly half the entire week’s loss as commodities, led by oil, gold, copper and iron ore fell.
Eurozone shares fell 0.8% on Friday and the US S&P 500 lost 1.1%, while the Dow lost 1.1% and Nasdaq lost 1.5%.
That was in response to the slightly weaker than expected eurozone September quarter GDP growth and softer than expected US retail sales in October, which added to concerns about US growth, just as markets expect the Fed to raise interest rates next month.
A sell-off in US retail stocks was a feature of Wall Street trading last week.
Over the week, Japanese shares stood out with a gain of 1.7%.
But US shares lost 3.6%, in a split week that at the start saw the S&P 500 come within 1% of its record high set in May, and end the week with its biggest loss for two months.
The S&P 500 fell 22.93 points, or 1.1%, to 2,023.04 on Friday.
The Dow sank 202.83 points, or 1.2%, to 17,245.24 and lost 3.7% over the week. And the Nasdaq Composite lost 77.20 points, or 1.5%, to 4,927.88 and finished the week off 4.3%.
Eurozone shares lost 3.1% and Chinese shares fell 2.3% with market regulators halving the allowable margins for traders on Friday night in an attempt to take some of the renewed speculative tone out of the Shanghai market in particular.
With BHP leading the way for other resources shares (because of the dam disaster in Brazil) the Australian market’s 3.1% plunge took values almost back to September lows, even though global shares remain well above them.
The stronger than expected Australian jobs data for October was also the big surprise locally.
The retreat on Wall Street last week halted a six week surge for the broader markets as the September quarter earnings season turned out to be a bit better than forecast.
But weak results and sales report from a string of leading retailers (Macy’s and Nordstrom especially) brought the rebound to a halt and investors are looking for more selling this week in the wake of the terror attacks in Paris on Friday night.
