The ASX will be looking for a 80 point plus surge this morning after trading on global markets overnight reversed.
The reversal will be enough to make local investors look sheepish (and much of the media as well) after the near $35 billion loss of value on the ASX yesterday.
The Australian dollar rose back towards 76 US cents after weakening yesterday.
The speech overnight by a senior Fed official was sufficiently benign about the prospects of another rate rise from the US central bank, that US markets changed tack.
European markets had been down by 2% and a bit more in early trading, but those losses had halved by the end of the session.
Yesterday markets in Asia, led by Australia, Japan and Hong Kong sold off on fears about a possible US rate rise in a replay of what happened last December when US rates rose for the first since 2008.
The ASX 200 lost 2.2% (and is now under the level at the start of the year), Japan’s broad Nikkei fell 1.7% and Hong Kong’s Hang Seng is off 3.4% (the worst fall since early February) and China’s Shanghai Composite drooped 1.8%. China’s Shenzhen market lost 2.9%. South Korea’s Kospi index fell more than 2%.
The ASX had the biggest one day fall since the Brexit vote on June 23 in what at times seemed like a bit of headless chook selling.
There was no reason for the sell off yesterday except it was a catch up to Friday night’s sell off in US markets – which had no real basis in fact except the growing belief the Fed will be lifting rates a second time this year.
Much of the local selling seems to have been driven by investors offshore.
The speculation is that rates will rise at the December meeting of the Fed, but next week’s two day meeting is also being eyed.
Bonds continued to sell off in Japan and Australia yesterday with the yield on local 10 year T bonds jumping to 2.04%.
German bonds moved further into positive territory, while Japanese bonds ended in negative territory, but within sight of nudging back into positive territory as well.
The Australian sharemarket suffered its worst day since the Brexit vote, with nearly $35 billion in value wiped off the board after global financial markets were hit hard by fears a September US rate rise is on the horizon.
The ASX fell 2.2% to 5,219.6, losing about $34 billion in value, while the All Ords also dropped 2.2% to 5319.1.
No sector was spared, but banks, materials and energy stocks were hit the hardest as commodity prices fell. Only five out of the top 200 stocks posted a gain, including QBE Insurance, Seven West Media and Tattersalls.
Outside the ASX 200, Elders shares jumped 5% on news of higher profits expected for the year to September 30 and a decision to quit the live cattle trade.
Among the hardest hit were miners, leading to BHP sliding 4%, Rio Tinto lost 2.4%, Newcrest dropping 5% and Fortescue plunging 5.1%. Energy major Woodside lost 2.7%.
The big banks all dropped by between 2.6% and 1% (which was the fall for the CBA, which managed to close back above $70, after dropping to a three-year low during the session).
