Morning traders. Thanks Trees and after-market regulars.
Market wrap:
The share market is set to open sharply lower after Rio Tinto and BHP unwound much of Monday night's overseas gains and US stocks spiralled to an nine-week low.
The December SPI 200 futures contract slumped 60 points or 1.1% to 5198 as European economic data disappointed and the International Monetary Fund warned of the potential for a stock market correction.
A 'risk-off' session saw gains in defensive assets, including US treasuries and precious metals, and heavy falls in US and European stocks. The S&P 500 fell 30 points or 1.52% to close at its lowest level since mid-August. The Dow lost 273 points or 1.61% during its worst session since July. The Nasdaq dropped 70 points or 1.57%.
“A combination of not-perfect economic data and some geopolitical risk has put doubt in some investors’ minds and that brings some volatility,” Dan Curtin, global investment specialist at JP Morgan Private Bank in the US, told Bloomberg. “The dollar surge, Hong Kong protests, Ebola scare and weakening oil prices, somewhere circled together in those things is the root of this recent pullback.”
Fears about European growth were heightened by a second straight night of weak German economic data. Industrial output from Europe's largest economy slumped 4% in August, the largest decline in four years, according to figures released last night. The report came on the back of a Monday night report of the biggest fall in industrial orders since the end of the GFC. The Stoxx Europe 600 dived 1.53% as Germany's DAX 1.34%, France's CAC 1.81% and Britain's FTSE 1.03%.
Adding to pressure on equities was a reduced global growth outlook from the IMF and a warning that some stock valuations may be "frothy". The fund cut its growth expectation for next year to 3.8% from a July forecast of 4%, and for this year to 3.3% from 3.4%.
“Downside risks related to an equity price correction in 2014 have also risen, consistent with the notion that some valuations could be frothy,” the fund noted in a report quoted on Businessweek.
Rio Tinto pared Monday's 9.12% rally after confirming yesterday that it rebuffed a merger approach from Glencore in July. Rio lost 4.06% in US trade. BHP gave up 1.47%. Spot iron ore for import to China yesterday rallied $1.10 to US$80 a dry tonne.
Oil settled at a 17-month low as weak German data added to a growing list of deteriorating demand signals. West Texas Intermediate crude oil for November delivery drooped $1.49 or 1.7% to US$88.85 a barrel.
Gold stocks fell to a six-year low in the US despite modest haven-buying in the metal overnight. The NYSE Arca Gold Bugs index plunged 3.4% to a level last seen in late 2008. Gold for December delivery edged up $5.10 to settle at US$1,212.40 an ounce and was lately at US$1,210.70.
Nickel was the best of the base metals in London trade, rising for a third session amid speculation that an Indonesian export ban will finally start to impact supplies. London nickel put on 1.5%, aluminium 1.3% and zinc 0.4%. Copper lost 0.6%, lead 0.5% and tin 0.8%. US copper for December delivery was recently off 0.1% at US$3.03 a pound.
The dollar was this morning buying 88.2 US cents.
TRADING THEMES TODAY
REBOUND UNRAVELS: The ASX yesterday staged the sort of mid-session recovery that often marks a short-term bottom. Unfortunately, Wall Street and Europe did not play along last night so it looks like we're likely to retest yesterday's lows just 24 hours later. Damn. To compound a dour outlook today, US stocks closed at their lows, which implies there may be more to come. The S&P 500 may have the early-August low in its sights, roughly one more heavy fall below. Anyone looking for havens will be disappointed in the action in gold stocks, with the HUI taking out the last of the recent horizontal supports. China releases services data at 12.45pm EST, but this report does not have the same impact on Australian equity trade as the monthly manufacturing reports.
ECONOMIC NEWS: No significant domestic news scheduled today. HSBC releases its non-manufacturing PMI for China at 12.45pm EST. Tonight's US highlight is the minutes from the last Federal Reserve meeting. Also due are crude oil inventories and a bond auction.
