Look out for a relief rally (or a dead cat bounce) on local and Asian markets after the selling wave exhausted itself, but still left many markets in the red for a second day.
After the near $US60 billion sell off here yesterday (a 3.8% fall in the ASX 200), overnight trading boosted the futures market and a 40 plus point rise is ahead of us this morning.
But it will be a weak reply to the big sell off (which followed the inexplicable 71 point jump on Monday in the local market).
The Aussie dollar traded under 70 US cents, gold eased, but oil edged higher, while copper was flat. All in all it was a very unconvincing day of trading.
Chinese iron ore prices fell 1.4% to $US56.05 per tonne overnight, which will be noted by worried investors.
On Wall Street, stocks finished mostly higher with the S&P 500 Index breaking its five-days of losses, but the Nasdaq Composite Index adding to a sixth day of losses and now is within sight of an 11 month low.
The Dow closed up 47.24 points, or 0.3%, at 16,049.13, after trading within a 177-point range. The S&P 500 closed up 2.32 points, or 0.1%, at 1,884.09, after trading in a 28-point range.
But the Nasdaq closed down 26.65 points, or 0.6%, at 4,517.32, after trading within a 109-point range during the day.
It is heading for its lowest level since late October, 2014. Apple fell 3% and as the end of the quarter approaches, it is down more than 10%.
But the big driver continues to be the sell off in pharma and healthcare related stocks as US Congressional committees start probing the activities of many big drug makers and healthcare operators.
In London shares in Glencore bounced sharply, closing up 17% at just over 80 pence as the company denied it had credit problems and a number of major Wall Street analysts and firms expressed support for the troubled commodity and mining giant.
That was also an unconvincing rebound in the share price – more a dead cat type of bounce that left all the questions troubling investors unanswered.
Investors should look closely at what happens in Tokyo today where the Nikkei lost all of its 2015 gains yesterday in the 4% fall to an eight month low. It is now negative for the year and even if it bounces today, there are growing worries about the health of the economy, with talk that more stimulus spending is needed.
In China, commodity and energy shares pushed shares lower. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen fell 2% and the Shanghai Composite lost 2.1% Hong Kong’s Hang Seng index fell 3.6%.
China’s big test comes with the two surveys of manufacturing activity due for release tomorrow – weak data will put renewed pressure on markets and companies like Glencore.
In Australia, the shares in Australia’s biggest mining company, BHP Billiton, fell to their lowest point since November 2008 yesterday, down 6.6% to $21.61. The losses followed a 6% drop in London. BHP shares edged up 0.8% in London and Rio shares were up 1.8%.
Rio Tinto’s shares also fell in London, and were down 4.5% on the ASX to $46.52, marking a multi-year low. Fortescue Metals Group shares fell 5.6% to $1.68.
The fall in the resources stocks led a broad-based sell-off on the benchmark ASX 200, reversing the rally on Monday and sending the benchmark to a close at 4918 points and a fresh two-year low.
The big four banks were also whacked, with ANZ losing 3.7% to $26.38, the Commonwealth falling 3.5% to $70.51, the National Australia Bank lost 3.6% to $29.20 and Westpac losing 3.8% 3 to $29.10.
