ASX weakness is set to continue as low oil prices overhang world markets and a rally in the US dollar continued pressure on commodities.
Dec. SPI futures point 29 points lower at 5052
Europe markets were lower as fallout from Anglo American job cuts and a decline in pharmaceutical giant Bayer weighed on sentiment. Earlier in the session a rally in oil prices was a positive, but the commodity then lost earlier gains.
Strong rises from VW and Porsche couldn't help the DAX from declining.
Dax -.%
FTSE -.1%
U.S. stocks were down late on Wednesday after reversing course earlier in the day as oil resumed its decline and investors took profits ahead of a Federal Reserve meeting next week that is expected to result in an interest rate hike.
While several investors struggled to explain a sharp reversal by the three major U.S. indexes, they cited concerns about slowing global economic growth against a backdrop of weak oil and the first U.S. rate hike in almost a decade.
"We've got a heck of a commodity bear market here and the Fed's about to raise interest rates. People are growing concerned they're going to raise rates at the worst possible time," said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.
"Oil went up which brought the entire market up. Then the computers came in to sell entire baskets to take profits," Phipps said.
Crude oil LCOc1 CLc1 prices resumed their slide, after rising as much as 4 percent earlier in the day as the market ignored a drawdown in U.S. crude stockpiles to focus on a build in distillates, including diesel, that was twice as big as expected.
The energy index .SPNY trimmed earlier gains but was up 1.2 percent in late afternoon trading. The index has lost more than 9 percent since the beginning of the month.
Investors are concerned about China's slowing economy and its impact on global demand as well as signs of weakness in U.S. manufacturing.
“I think the market is starting to be a little bit more concerned about global economic weakness,” said Paul Nolte, senior vice president and portfolio manager at Kingsview Asset Management in Chicago.
S&P 500 -.75% @ 2047
Nasdaq -1.5% @ 5023
Veteran traders and investors are noticing growing reports of strains in the world low-grade (junk) bond markets. The problems in junk bonds are said to be as bad as what was seen during the height of the world financial crisis in 2008. The energy sector is really feeling the credit pain given the sharp drop in crude oil prices. This matter bears monitoring in the weeks and months ahead. A junk bond crisis could spill over into a general credit crisis that impacts all markets. Such could also prompt some significant safe-haven demand for gold, as a serious worldwide credit crunch would negatively impact world stock markets, too.
The House of Pain
The crude oil market is in keener focus this week as Nymex futures prices on Tuesday fell to a nearly seven-year low below $37.00 a barrel. Oil prices saw a mild short-covering bounce earlier Wednesday, but then sold off as the session progressed. The slumping oil market is also keeping buyers in other raw commodity futures markets very timid, including the precious metals. World stock markets are also jittery over the steep decline in oil prices. The next downside target for the energized crude oil market bears is the 2009 low of $33.20 a barrel. Most raw commodity markets won’t begin to see their own price recoveries until crude oil leads the way.
Oil $37.35 -.16
Ore with 62 per cent content delivered to Qingdao rose 1.1 per cent to $US39.08 a dry ton on Wednesday, rebounding from Tuesday's record low, according to daily prices compiled by Metal Bulletin dating back to May 2009. The commodity, which plunged below $US40 this week, advanced for the first time in eight days.
Copper flat
Nickel -.6%
aluminium +1.2%
Zinc flat
Gold prices ended the U.S. day session near steady in choppy, two-sided trade Wednesday. A sharp drop in the U.S. dollar index did little to help the precious metals bulls on this day, as crude oil prices lost their early gains and are trading near this week’s nearly seven-year low.
Gold $1072 -.2%
AUD Gold $1483
HUI +1.9%
