Local investors are heading into a down day today after realism, growth fears and worries about some of the world’s biggest banks combined to send markets lower overnight.
That little two day rally in the local market was snuffed out overnight as those fears about growth in Europe and the US and the health of some of the world’s banks sank markets, sending equities down sharply, oil lower, copper lower and key interest rates lower.
Watch for our banks to come under pressure, especially as investors concentrate on the impact of the collapse of steelmaker Arrium on their bad debts.
Only gold ended higher as a sharp rise in the value of the yen against the US dollar (which will add pressure to the already sagging Japanese economy) triggered the sell off.
After a mixed day in Asia, European markets opened higher and traded in the green.
But the jump in the value of the yen – which helped send the Aussie dollar close to 75 US cents (it actually dipped to 74.92 during the session) saw renewed concerns about a flight to safety, so sharemarkets sank and key government bonds surged, sending yields sharply lower. The USS 10 year bond yield tumbled to 1.69%.
Our market will start with a loss of around 40 to 50 points according to overnight trading on the ASX 200.
That was after a two day rise in oil prices helped the Australian sharemarket to a second day of gains yesterday.
The ASX 200 Index and the All Ordinaries Index each added 18 points, or 0.4%, to 4964.1 and 5042.3 points, respectively. This morning they are both heading lower.
And investor worries about bank bad debts are certain to come to the fore as they focus on the fallout from yesterday’s collapse of steelmaker Arrium with its near $4 billion in debts, including around $1 billion owed to the local big four.
In New York, Wall Street sank amid across the board selling.
The S&P 500 fell 24.75 points, or 1.2%, to close at 2,041.91 with all 10 sectors finishing lower. It is now down 0.1% so far in 2016.
That means the mini-rally of February and March has gone.
The Dow slumped 174.09 points, or 1%, to finish at 17,541.96, led by a 3.1% drop in Goldman Sachs and a 3.8% slide in the price of Citi shares. The Dow though is still up 0.7% for the year so far.
And the Nasdaq slid 72.35 points, or 1.5%, to end at 4,848.37. The index is down 3.2% this year as tech stocks, especially pharma issues, remain on the nose.
Oil prices fell as the brief rally ended. Brent crude fell 41 cents, or 1%, to settle at $US39.43 a barrel in London, while in New York, West Texas Intermediate futures fell 49 cents, or 1.3%, to $US37.26 a barrel. Oil prices were a touch higher in early Asian trading around 7am. Gold futures ended higher, mostly boosted by the dollar’s slump versus the Japanese yen which rallied higher.
Comex gold for June delivery rose $US13.70, or 1.1%, to end at $US1,236.20 an ounce. It rose further in early Asian trading to be around $US1,242 an ounce just after 7am.
Silver rose less than 1% to $US15.20 an ounce, but copper slumped more than 3% to just over $US2.07 a pound.
