The 100 point rally in the ASX 200 over the past couple of days will come to an end this morning after a widespread sell off in offshore financial markets triggered by a surge in the value of the US dollar.
Our market will be down around 30 points, according to trading on the overnight futures market.
But despite the stronger greenback hitting gold (down 1.4%) and oil (down 1.6% for Brent oil), and copper (down 3.5%) iron ore prices rose, up 2.6% overnight to $62.78 a tonne. That takes the rise in the past four trading days to nearly 10%.
As investors returned in the US, UK and Germany after a holiday on Monday, markets took fright at good economic news in the US, the positive comments from Fed chair, Janet Yellen about the almost certainty of a rate rise in 2015, and fears about Greece’s financial situation.
US stocks sold off with the S&P 500 and Dow suffering their biggest one-day falls in three weeks. The Nasdaq also fell sharply
The sharp increase in the greenback saws investors to dump riskier assets such as equities and commodities, while driving them into safe havens such as Treasury bonds where yields on 10 year bonds fell to around 2.14%.
Nervy traders in the forex market took the flow of data and Ms Yellen’s comments on Friday to mean they had better start factoring in at least one rate rise in the US this year instead of wondering if it might be pushed out to 2016, which seemed to be the case a week ago.
Oil and gold both fell, while copper also dipped lower.
The stronger greenback knocked the value of the Aussie dollar down to close to 77 US cents this morning. In fact the Aussie dollar touched a one month low of 77.29 US cents in early Asian trading this morning.
The S&P 500 closed off 21.86 points, or 1%, lower at 2,104.20,with falls across the board. The Dow dropped 190.48 points, or 1%, to 18,041.54, while the Nasdaq Composite Index ended the session 56.61 points lower, or down 1.1%, at 5,032.75.
The flow of data yesterday in the US was positive with new home sales rising strongly, and durable-goods orders showed signs of revival in business investment in April.
With the exception of the Italian market, bourses across Europe weakened yesterday – the German market fell 1.6% overnight and the UK market was off 1.1%.
