Morning traders. Thanks loungers, especially @Ravgnome and @Patterns.
Outlook for the day: Severely negative. The ASX 200 looks primed to retreat nearly 1.8% from record levels after recession fears triggered a sharp sell-off on Wall Street.
ASX futures: down 144 points or 1.78%
Overnight themes:
- US stocks tanked after weak economic data fuelled fears the economy will lose momentum faster than the Federal Reserve can cut interest rates.
- The Dow tumbled almost 500 points, finishing 1.21% in the red after being down as much as 1.8%.
- The S&P 500 shed 1.37% despite a positive reaction to earnings from Facebook owner Meta Platforms. Shares in the company rallied 4.82%.
- The Nasdaq lost 2.3% a day after surging 2.64%. The Russell 2000 index of small caps, which had outperformed recently, dived 3.03%.
- Early gains following Meta's earnings evaporated after reports showed a sharp contraction in factory activity and a jump in claims for unemployment benefits.
- The Institute of Supply Management's manufacturing PMI declined to an eight-month low of 46.8 last month from 48.5 in June. The scale of the contraction caught economists off-guard. A separate report showed first-time claims for jobless benefits climbed to an 11-month high last week, indicating growing softness in the labour market. Some commentators now fear the Fed has left it too late to start cutting rates.
- “The data we have got since the Fed meeting signals all of a sudden that people are now worrying that maybe it isn’t a soft landing and the Fed has vacillated too long” - Tom Fitzpatrick, managing director for global market insights at R.J. O’Brien and Associates (per CNBC).
- Recession-sensitive stocks were hit hardest. On the Dow, Boeing dived 6.45%, Chevron 4.89% and Caterpillar 4.24%. Defensive stocks, including healthcare providers, rallied.
- Utilities and real estate were the pick of the sectors as treasury yields fell further below 4%. Also positive: consumer staples, health and communication services (Meta).
- Tech once again bore the brunt of the selling, falling 3.36%. Energy shed 2.56%, industrials 1.83%, financials 1.38% and materials 0.35%.
- The Australian dollar fell below 65 US cents for the first time since May 1 as a "flight to safety" lifted the greenback.
- A fund of US battery metal miners slumped near to a four-year low after weak lithium prices prompted American giant Albemarle to scale back development plans for its Kemerton plant in WA. The miner announced yesterday it would halt construction of a planned third production train and place its second train on care and maintenance. The Global X Lithium & Battery Tech ETF dropped 3.11% to its lowest since September 2020.
- Industrial metals turned lower after an unexpected contraction in a private measure of Chinese factory activity added to worries about the health of the economy. Caixin's manufacturing PMI fell to 49.8 last month from 51.8 in June, according to a report released yesterday. Readings below 50 indicate shrinking activity. A retreat in metal prices has accelerated since last month's Politburo meeting ended without announcing meaningful stimulus plans.
- "It's a guessing game on China. The data is indicating that they need to make a bolder move, make an announcement fairly soon. They had the politburo meeting, which could have been a great opportunity to articulate something meaningful and bold, but they didn't really do that" - Nitesh Shah, commodity strategist at WisdomTree (per Reuters).
- Iron ore caught a leg-up from an upbeat demand forecast from Rio Tinto. The miner's CEO said yesterday the company expects solid commodities demand as the Chinese economy grows "plus or minus 5%". Benchmark ore rallied 2.35% in China and 1.91% in Singapore.
- New highs for gold failed to protect US precious metal miners from the dour market mood. The NYSE Arca Gold Bugs index fell 1.42% as the yellow metal settled US$7.80 or 0.3% ahead at a new closing record of US$1,280.80 an ounce. The metal cracked US$2,500 for the first time during the session, setting a new intraday peak at US$2,506.60.
Key events today:
- Q4 wholesale inflation (PPI) - 11.30 am AEST
- US July employment report - tonight
S&P 500: down 76 points or 1.37%
Dow: down 495 points or 1.21%
Nasdaq: down 405 points or 2.3%
Dollar: down 0.75% to 64.99 US cents
Iron ore (Dalian): up 2.35% to US$108.28
Brent crude: down US$1.32 or 1.63% to US$79.52
Gold: up US$7.80 or 0.3% to US$2,480.80
Silver: down 46 US cents or 1.59% to US$28.48
NYSE Arca Gold Bugs: down 1.42%
Bitcoin: up 0.11% to US$64,793
Copper (LME): down 2.41% to US$9,002.50
Nickel (LME): down 1.82% to US$16,190
Lithium carbonate (China futures): down 0.36% to US$11,275
Global X Lithium & Battery Tech ETF: down 3.11%
Uranium (spot): down 1.21% to US$85.50
BHP: down 2.29% (US); down 0.47% (UK)
Rio Tinto: down 2.56% (US); down 0.44% (UK)
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