Regional markets retreated this morning and gold hit a record as an impasse over the US debt ceiling weighed on US futures and oil.
At lunchtime the ASX 200 was down 50 points or 1.1% at 4552 as a broad sell-off pulled down all sectors except gold shares.
The decline came after weekend talks among US politicians ended with the two camps working on rival plans to avoid a catastrophic US sovereign default if no deal is reached before the deadline to raise the US debt ceiling next Tuesday.
"The only thing you can guarantee is volatility over the coming days," Ben Potter, research analyst at IG Markets told Fairfax. "Everything's going to be centred on what happens in the States. If they do come up with a deal, the focus will quickly turn to earnings. But as it stands, [earnings are] likely to pale into insignificance."
US futures were pointing to a gloomy start to the trading week. Dow futures were recently off 120 points or 0.95%. Japan's Nikkei eased 0.63% this morning, Shanghai 1.17% and Hong Kong's Hang Seng 0.76%.
Gold was the big winner from the uncertain outlook. Spot gold punched through US $1620 an ounce in early Asian trade this morning before paring gains to trade recently at US $1613.30 an ounce, up $13.
"Raising the debt ceiling in such last-minute fashion relays [an] unwelcome message to investors," analysts at MF Global told MarketWatch. "The main casualty of such a decision will be the US dollar. Gold should benefit the most."
Crude oil futures slumped $1.02 or 1% to US $98.85 a barrel. The dollar was buying US $1.0827.
Down we go, but with minimal evidence of panic here or in Asia. This is what is sometimes referred to as "an orderly decline". There should be some attractive entries coming up later in the week if the brinkmanship continues in the US. In the meantime, I scalped a swing in SPT, added CPU at support for any arvo recovery, mistimed a buy in AWE and exited pretty much for brokerage and grabbed some TCL for this morning's recovery towards the exit price received by the Canadian pension funds. Still wondering why I didn't buy HST at 16 cents - watched it long enough.
