Outlook for the day: Negative ahead of an RBA rates announcement this afternoon. ASX futures point to more down-pressure following a third night of heavy selling in the US as a global market rout continued. However, the futures decline here is notably mild relative to overnight selling on Wall Street and in much of Asia yesterday.
ASX futures: down 27 points or 0.36%
Overnight themes:
The Dow and S&P 500 suffered their heaviest falls in almost two years as a global market rout continued for a third session in the US.
The Dow gave up more than a thousand points or 2.6% as all 30 component companies declined. Tech giants Intel and Apple led the retreat. The fall was the Average's worst since September 2022.
The S&P 500 shed 3%, also its biggest loss since September 2022. No sector was spared. Declines ranged from 1.72% for industrials up to 3.78% for tech.
The Nasdaq lost another 3.43% a day after entering a technical correction. Apple dropped 4.82% after Warren Buffett's Berkshire Hathaway sold half its stake. Nvidia's fall from its peak neared 29% with an overnight loss of 6.36%. Japan's Nikkei 225 index tumbled 12.4% yesterday during its worst session since 1987.
Market observers pointed to two triggers for the carnage over the last few sessions: fear that a recent run of soft US economic data indicates a US recession is increasingly likely; and the end of the so-called "carry trade" out of Japan after the Bank of Japan raised rates.
"I think people were basically lulled into a sense of security, yet the market itself was very vulnerable to a correction — and the weaker than expected economic and employment data provided that catalyst for correction” - Sam Stovall, chief investment strategist at CFRA Research (per CNBC).
US stocks pared losses overnight after a measure of services sector activity rebounded last month from a four-year low. The Institute of Supply Management's services PMI climbed to 51.4 from 48.8 in June. Readings above 50 indicate expanding activity.
Treasury yields continued to slide as investors bought havens, including government bonds. (Bond prices move inversely to yields.)
Wall Street's "fear gauge", the VIX or volatility index, touched its highest level since the pandemic in 2020 before paring its rise.
Commodity prices joined the retreat. Copper fell to its lowest in four and a half months. Brent crude touched its weakest level since the opening sessions of the year. US gold miners were knocked down 3.5% as the yellow metal lost a little more than 1%. Silver gave up more than 4%. Gas and agricultural markets also took a hit. Wheat lost more than 3%.
"These markets are all linked. Metals and energy markets are sensitive to macro themes... Equity investors effectively link some of their portfolio to commodity markets either directly or through indices" - Liberum analyst Tom Price (per Reuters).
Iron ore offered a flicker of green in the turmoil, rising almost 2% in China as a pick-up in services activity last month soothed worries that the economy was faltering. Caixin's gauge of China services sector activity expanded for a 19th straight month. Steel and steel-making ingredients also improved.
Key events today:
July job ads - 11.30 am AEST
RBA interest rate announcement - 2.30 pm AEST
S&P 500: down 160 points or 3%
Dow: down 1,034 points or 2.6%
Nasdaq: down 576 points or 3.43%
Dollar: down 0.05% to 64.94 US cents
Iron ore (Dalian): up 1.97% to US$108.69
Brent crude: down 51 US cents or 0.67% to US$76.30
Gold: down US$25.40 or 1.03% to US$2,444.40
Silver: down US$1.18 or 4.16% to US$27.21
NYSE Arca Gold Bugs: down 3.48%
Bitcoin: down 6.68% to US$54,754
Copper (LME): down 2.22% to US$8,854.50
Nickel (LME): down 0.89% to US$16,205
Lithium carbonate (China futures): up 0.36% to US$11,190
Global X Lithium & Battery Tech ETF: down 2.74%
Uranium (spot): down 0.3% to US$82.50
BHP: down 1.8% (US); down 1.71% (UK)
