A weak start for the ASX today after wall Street and other global markers sold off on Friday.
Reflecting that weak lead, ASX 200 futures slumped 47 points or 0.7% pointing to a weak opening for what is the final week of the December half and full-year reporting season.
That will wipe out last week’s small 0.1% gain when the ASX 200 dipped 25.3 points on Friday to end at 7139.0 (still an all-time closing high).
The Australian dollar fell to under 66 US cents at one point to its lowest in over ten years (65.86) on fears of a big hit to Australian exports from the coronavirus, increased talk of RBA rate cuts and concerns about the US economy and a dollar that strengthened
There’s been much too much rubbish written about the falling dollars with screaming headlines and blighted commentary.
As the AMP’s chief economist, Shane Oliver pointed out in his weekly note “the slump in the $A by making Australia more competitive internationally will act as a shock absorber for the blow to exports from the coronavirus outbreak, which partly also explains why the Australian share market is at or around record levels.”
He thinks the $A “is likely to fall to around $US0.65 as the coronavirus outbreak depresses Australia’s exports and the RBA eases further but then drift up a bit as global growth improves to end 2020 little changed.”
For some big resource and other groups (BHP, Rio Tinto, Newcrest, Fortescue, CSL, Cochlear and QBE) the fall in the value of the dollar is good and bad – bad because there is no impact on revenues and profits in Aussie dollars.
It’s good though because Australian dollar costs fall in terms of the US currency helping the companies maintain or improve their competitiveness.
Eurozone shares fell 0.6% on Friday and the US S&P 500 lost 1.1% reflecting concerns about the impact of the Covid-19 outbreak on growth as the number of cases outside China continues to rise.
Last week saw US and Japanese shares fell 1.3% and Eurozone shares lost 0.9% (making the small ASX gain look good!)
Chinese shares though managed to rise 4.1% though as the government continued to roll out new stimulus measures.
Australian shares were helped by better than feared profit results and renewed talk of RBA interest rate cuts.
Bond yields fell on growth fears, but commodity prices rose with oil up on supply concerns and iron ore up on Chinese stimulus measures, gold, copper and other metals ended higher as well.
Wall Street fell on Friday, ending a two-week winning streak, as the spread of the COVID-19 epidemic from China to neighbouring countries amplified worries about the impact on supply chains and global economic growth.
Tech shares were the biggest loser in the S&P 500 index, with the sector losing 2% as investors weighed the potential fallout resulting from the coronavirus. Apple shares lost 3.36% for instance after its revenue warning early in the week.
The Dow ended below 29,000, shedding 227.51 points, or 0.8%, at 28,992.40.
The S&P 500 lost 35.48 points, or 1.1%, to settle at 3,337.75, its biggest one-day percentage decline since in three weeks. The Nasdaq dropped 174.37 points, or 1.8%, to finish at 9,576.59, its worst single-day percentage fall for three weeks as well
For the week, the Nasdaq lost 1.6%, while the Dow fell 1.4% and the S&P 500 shed 1.3%, ending that two-week win streak for each benchmark.
