On the face of it, trading on the ASX today should be a continuation of yesterday’s rough passage, but there were signs late in the US trading session of a moderating of the trend, even though the US market turned lower.
Gold rose and an earlier slide in oil turned into a late rally as West Texas Intermediate rose 2.3% to around $US36.55 in early Asian trading.
The Aussie dollar, which had dipped to around 75.30 US cents, recovered to trade around 75.40 around 7.30 am and the ASX futures market saw losses of 30 points earlier in the session sliced to a loss of 18, also just after 7.30 am.
The dollar’s kneejerk reaction to comments yesterday from RBA Governor, Glenn Stevens about the rising value of the dollar faded in offshore trading as other factors swamped sentiment.
So fears of a repeat of the nasty sell-off here yesterday in the banks in particular, faded. That was despite an obvious selling wave in major European, UK and some key US banking stocks.
That may still worry local investors, especially if there’s more selling in Tokyo as the yen continues to strengthen against the US dollar.
The local banks remain the stocks to watch for an indication of the market’s direction – watch also for a possible release of more news from Arrium today on its recapitalisation – there could be big losses in store for the four biggest banks in any deal.
News of a crackdown by the US Treasury on the spreading tax inversion takeover deals – which have seen US companies takeover competitors in lower tax domiciles, such as Ireland and Canada – hit sentiment, while after trading saw reports the US Government will tonight reveal it was blocking the $US25 billion takeover of oil services group, Baker Hughes, by its larger rival, the giant Halliburton.
That move, if confirmed, will be greeted warmly by investors who have felt Halliburton moved to early in the oil price slide to bid for Baker Hughes. Now it can free itself from an over-priced deal.
Bond yields in Europe and the US fell to six week lows, again, for a second day and the US dollar was easier, rose and then fell – but the yen hit a 14 month high against the greenback in a move that will worry the Bank of Japan. The Japanese economy appears headed for a March quarter contraction, according to more economists.
Wall Street sank overnight in a second day of losses as fears about global economic health dogged the market and fuelled selling in riskier assets. Wall Street hit lows close to the end of the session.
The S&P 500 fell 20.96 points, or 1%, to close at 2,045.17 which left the index up less than 0.1% on the year.
The Dow dropped 133.68 points, or 0.8%, to close at 17,603.32. It was its worst one-day drop since February 23, when it sank 189 points, according to FactSet.
And the Nasdaq Composite Index dropped 47.86 points, or 1%, to close at 4,843.93.
Gold futures jumped as investors rushed toward safety plays with Comex June gold traded higher to close the after hours session up 1.1% or $US13.50 at $US1,232.70 an ounce.
Oil was mixed all day, but rallied at the end and into after hours trading to add 2.4%, or 86 cents to close at $US36.56 a barrel.
Stock-market indexes in Europe and Japan were also sharply lower.
European stock markets suffered broad-based losses on Tuesday as an unexpected plunge in German manufacturing orders and worries about global growth hurt sentiment.
The Stoxx Europe 600 index fell 1.9% to end at 328.15, the lowest close since late February.
German stocks led the declines in Europe, with the DAX 30 index down 2.6% at 9,563.36, London’s FTSE 100 index lost 1.2% to 6,091.23, while France’s CAC 40 index dropped 2.2% to 4,250.28.
In Asia the Nikkei lost 2.4%. Hong Kong, Australia and South Korea also fell, but Shanghai rose more than 1.4%, adding to suspicions there could be some quiet official support for the markets in China at the moment.
