After trying to convince themselves that Monday’s selling was overdone and edging share prices higher in Asia, Europe, and the US on Tuesday, a warning from US health authorities knocked that overconfidence for six, sending Wall Street sharply lower for a second day and dragging gold, oil and interest rates lower.
That set up a third day of selling in Australia and Asia today.
The Dow suffered its worst two day fall in history overnight after it fell 879.44 points on of top Monday’s 1,031 point plunge. Tuesday’s 3.15% slump pushed the index deeper into the red for 2020 with a loss now of 5.11%.
The S&P 500 joined it there, losing 3% or 97.58 points, leaving it down 3.17% so far in 2020. The Nasdaq slid 2.77% or 255.67 points. It is now in the red by 0.08% for the year so far.
The ASX 200 was still up 2.73% for the year so far, but some of that gain will go today.
Our market will start down around 160 points after a sell-off on the ASX 200 futures that saw the loss fall to around 183 points at 7 am Wednesday.
Don’t be surprised though if, after an early loss, the ASX 200 is dragged back by local investors who seem to be among to be still overly optimistic about the impact of the coronavirus.
That pollyannaish local sentiment though will be tested though by the continuing spread of the COVID-19 disease through Europe in particular.
New cases emerged in Italy, Iran and South Korea and were reported in Austria, Croatia and Spain’s Canary Islands where a 1,000 room hotel was quarantined after a case (linked to the Italian Lombard region where the virus first appeared) was revealed.
Wall Street slumped after the country’s Centres for Disease Control and Prevention (CDC) warned Americans to prepare for the likelihood that the coronavirus will spread to communities across the US.
European markets sold off for a second day although the falls were not as large as on Monday – the Italian market was down by 1.4% compared to the 5% plunge on Monday and the Stoxx 600 index fell 1.7%, half Monday’s fall.
The Aussie dollar traded as low as 65.86 US cents again overnight, then regained the 66 US cent level, only to fall back under it in early Asian dealings.
But all that happened before the warning from US authorities (The CDC) that knocked Wall Street into near free-fall at one stage.
Only government bonds remain on the safe-haven list for investors increasingly fearful of the spread of the coronavirus outside of China.
Gold and sliver were sold off but bonds again rallied and copper futures edged higher in a surprise.
The yield on US 10 year bonds, the key global indicator, fell to a new all-time closing low of 1.328%. Yields touched an all time intraday low of 1.31%, under the previous all-time intraday low of 1.325% set in June 2016.
But Comex gold for April delivery fell $US26.60, or 1.6%, to settle at $US1,650 an ounce, while March silver shed 68.5 cents, or 3.6%, to $US18.191 an ounce.
That was after gold had jumped 1.7% on Monday to a seven-year high as investors dumped equities and industrial and rural commodities and moved into safe-haven assets on growing fears about the spread of the COVID-19 outside of China.
Global iron ore prices fell on Tuesday with the price of 62% Fe fines delivered to northern China dipping 1% or $US1.05 to $US90.83.
Comex March copper edged up by 0.04% to settle at $US2.578 a pound and March palladium rose 5% to a fresh record high at $US2,647.80 an ounce. But Comex April platinum dropped 4.3% to $US932.30 an ounce.
West Texas Intermediate crude for April delivery fell $US1.53, or 3%, to settle at $US49.90 in New York. April Brent crude dropped $US1.35, or 2.4%, to end at $US54.95 a barrel in New York.
