Another big fall is in store for the local market today after Wall Street reversed much of Wednesday’s huge rise and plunged on Thursday.
The loss projected by the futures market will be massive – more than 150 points, which will more than wipe out Thursday’s tentative 70 point gain.
European markets fell around 1% to 2% but Wall Street’s losses grew and were all over 3% for the major indexes.
The drivers were anxieties about the worldwide spread of COVID-19 and growing concerns that governments will not be to control the impact of the disease on their economies.
That saw sent the benchmark 10 year Treasury bond yield to a fresh all-time low of 0.90% before bouncing a touch higher to be around 0.925% in early Asian trading on Friday morning.
The Aussie dollar rose above 66 US cents and then fell back, then rallied back over 66 US cents around 8 am.
The overnight ASX 200 futures market was showing a loss of 157 points at 8 am.
That will more than reverse Thursday’s stuttering 70.3 point (or 1.1%) gain that was held back by fears about the COVID-19 crisis which outweighed the positive push from Joe Biden’s good showing in the Democratic primaries on Tuesday.
Despite finishing in positive territory, it was a weak performance compared to that seen on Wall Street where all major indices posted gains in excess of 3.9% on Wednesday.
That all unravelled on Thursday – after European markets fell with the STOXX 600 index off 1.4%, Wall Street pushed the losses even higher and at one stage the Dow was staring at another 1,000 point loss in a week.
The Dow ended down 969.58 points, or 3.58%, the S&P 500 shed 106.16 points, 3.3%, and the Nasdaq lost 277.49 points, 3.10%.
For the year to date, the Dow is now down close to 9%, the S&P 500 has lost about 6.6%, and the Nasdaq is about 2.8% lower.
The ASX 200 has done a bit better – up to Thursday’s close it was ‘only’ down 4.3% year to date. It will lose a lot of ground today.
Comex gold futures bounced though. The April contract jumped $US25, or 1.5%, to settle at $US1,668 an ounce. May silver added 14.7 cents, or nearly 0.9%, to trade at $US17.393 an ounce. Comex May copper dipped 0.5% to $US2.573 a pound.
News that the US Congress approved an $US8 billion aid package on Thursday to combat the coronavirus didn’t help sentiment nor did the news that the IMF has a $US50-billion of lending programs to help businesses harmed worldwide by the COVID-19 epidemic.
Oil futures finished with a loss of nearly 2% after the OPEC recommended that its members and allies extend current production cuts to the end of the year, and reduce output by an additional 1.5 million barrels a day for the second quarter.
That didn’t convince traders who reckon to mop up the surplus caused by the virus, that 1.5 million barrel cut will have to be for longer and added to the existing cap.
OPEC and its allies are expected to announce a final decision in Vienna later today (Friday).
As a result, April West Texas Intermediate oil futures drop 88 cents, or 1.9%, to settle at $US45.90 a barrel in New York.
Brent crude futures hit a two and a half year low in Europe. – the global benchmark crude contract fell $US1.14, or 2.2%, to end at $US49.99 a barrel. That was the lowest front-month contract finish since July 24, 2017.
While the slide in oil prices will bring lower fuel prices for consumers and businesses, such as airlines, it matters all that much for the latter.
Despite the slide in prices, the impact of the virus’s disruption on airlines has already been dramatic – Thursday saw the collapse of a regional UK discount airline called Flybe thanks to the slump in travel demand due to the crisis.
Flybe’s collapse was immediate and came less than two months after a rescue deal for the company was agreed by its owners and the British government. The UK government refused to stand by that earlier deal, which then saw the airline fail.
Another discounter, Norwegian Air scrapped its profit forecast for 2020, while US budget carrier Southwest forecast a $US200 million to $US300 million hit to its first-quarter revenues.
Later on Thursday the International Air Transport Association, the global airline group, forecast airlines could lose up to $US113 billion ($US170 billion) in revenue this year, That’s more than three times as much as it predicted just two weeks ago ($US29 billion) as the virus continues to spread around the world.
“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” said Alexandre de Juniac, president of the trade group, the International Air Transport Association (IATA). The rapid shift in fortune is “almost without precedent,” he said in a story on Reuters.
