Markets sold off heavily overnight after the European Central bank again under-delivered on its much trumpeted plan to increase its stimulus for the eurozone economy and the ASX will join them today with a fall of 1.5% on the cards from the futures market.
Wall Street opened in the red, traded a bit lower, then plunged by around 300 points after 6 am Sydney time, then regained some of those losses, only to slide late in the session and end 1.4% to 1.6% lower.
It was as though US investors have rediscovered earlier fears about the Fed’s looming interest rate decision this month. With a solid US jobs report for November expected out tonight, our time.
More comments overnight from Fed chair, Janet Yellen overnight supporting the feeling that a rate rise is coming.
European sharemarkets suffered their biggest fall for months – the Stoxx 600 index fell 3.6%, and many markets saw losses of more than 2% and 3%.
The US dollar sold off sharply as the euro soared, rising the most this year in a matter of minutes. The Aussie dollar edged higher to 73.50 US cents in early Asian trading this morning.
Gold edged up, oil rose ahead of tonight’s Opec meeting on talk of more members wanting production cuts. US oil futures rose just on 3% to around $US41.15 a barrel, and gold was up to around $US1,061 an ounce.
But metal prices in London fell, although Comex copper rose 1.2% in New York to $US2.0575 a pound.
Our market is facing a 70 point plus plunge at the opening today (how that rapid rise on Monday now sees so far away) and local investors will have to deal with another slide in iron ore prices overnight.
Spot ore with 62% iron content fell 0.9% to $US40.75 a tonne overnight, a record low in daily prices compiled by Metal Bulletin dating back to 2009. So far this week the spot price is down 8.2% this week.
The sell-off came after European Central Bank President Mario Draghi said the bank would extend its bond buying by at least six months through March 2017, and left the door open for a further extension.
There had been investor hopes that bond purchases would be extended beyond the 60 billion euros ($US65 billion) currently approved each month.
The big move came in a statement before Draghi’s news conference, when the ECB cut its deposit rate further into negative territory.
The deposit rate on money left at the central bank overnight by banks was pushed down to negative 0.3%, compared with negative 0.2% previously. There had been expectations for the deposit rate to be cut to negative 0.4%.
The euro surged by around 3% against the greenback to $US1.0904 from round $1.0607 before the news broke.
Adding to the sense of disappointment, ECB staff cut forecasts for 2016 annual inflation to 1% from 1.1%. The 2017 outlook was trimmed to 1.6% from 1.7% – all below the 2% target of the eurozone central bank.
Inflation data out a day earlier showed a 0.1% rise in November, which saw analysts tip a bigger relaxation of monetary policy by the ECB than actually transpired.
