Australian 10-year bond yields fell further under the Reserve Bank’s cash rate to a new all-time low of just 0.88% yesterday as the ASX suffered a 2.9% slide in what was its worst one day’s performance since June 2016 with $A60 billion in value wiped from the market’s value.
The ASX 200 fell 187 points to 6,408.1 and is now down more than 400 points or 6% from its all-time high reached on July 30 of 6,845.
While fears were focused on an inverted US yield curve for Treasury Bonds – aided by a similar event in the UK and deepening negative yields for bonds in Germany, France, the Netherlands, much of Scandinavia and Japan, the slide in the Australian yield curve continued with the yield on 2 year bonds at 0.72%, the five year yield at 0.66% and the yield on the 30 year bond just 1.08 and a record low as well.
The falls are telling us the markets not only expect the Reserve Bank to continue cutting rates, but they are getting concerned about the health of the economy in a year or so – that’s despite no change in the seasonally adjusted jobless rate yesterday of 5.2% in July (even though the trend jobless rate rose to 5.3%).
The jobs data continued a significant revision – the 1,000 or so jobs added in June (in seasonally adjusted terms) was actually revised to a loss of 2,300, the first sign of job losses for a while in the monthly data from the Australian Bureau of Statistics. More than 41,000 new jobs were created in seasonally adjusted terms and the annual jobs new figure rose to 339,000.
The broader All Ordinaries lost 186.7 points, or 2.8%, to end the session at 6490.8.
Wednesday saw the Dow down more than 3%, the S&P 500 2.9% and Nasdaq dropped over 3% as well.
Early futures trading in Europe had Wall Street indexes in the green and looking to regain some but not all of those heavy losses.
The major banks led the market lower Thursday, with Commonwealth down 3% to $74.34. Westpac 3.2% to $27.61, ANZ 3% to $26.23 and NAB lost 3.1% to $26.80.
The major miners were also weaker. BHP shares fell 2.8% to $36.39 and Rio Tinto dropped 2.7% to $85.60.
Woodside Petroleum fell 6.7% to $31.18 on Thursday after its profits took a hit on the back of outages and lower prices plus a cut to its interim dividend.
Cleanaway Waste Management shares slumped 13.9% to $2.05 on the back of a small profit downgrade. Blackmores shares slumped almost 15% after reporting a 24% slide in its full-year net profits on the back of falling sales in China and the slashing of its full-year dividend.
Gold miners were firmer on Thursday as investors flocked to safe-haven investments and pushed gold futures further past $US1,500 an ounce and a series of six-year highs. Newcrest Mining shares edged up to $36.77, Northern Star Resources added 1.8% o close at $12.33 and St Barbara advanced 1.6% to $3.73
