Market wrap: Stocks are set for a second day of falls after a bearish tide swept global markets overnight.
Yesterday's big falls in Asia rolled through Europe and into north America, resulting in significant pullbacks in major equity and resources markets. China's Shanghai Composite Index tumbled 5.79% yesterday, its biggest fall since November, and dragged down Hong Kong (-3.62%), Japan (3.1%), Europe (-1.46% - 2.16%) and the US.
American stocks opened around 2% lower and never threatened to recover. The Dow lost 2%, its worst fall since July 2. The Nasdaq was down 2.75% and the S&P 2.43%. The mining-heavy Canadian index fell 2.84%. The GlobalDow index lost 3.02%.
The bubble in Chinese stocks, which has been deflating for a few weeks, shrivelled yesterday on fears over government tightening of bank loans and data showing foreign investment into China slumped 36% from last year. Metals stocks were hit hard, with several key companies falling by the 10% limit on Chinese bourses.
The overseas falls compounded fears in the US after last week's poor retail and consumer sentiment data suggested a turnaround in the economy may be further off than many hope. Banks tumbled 5.14% overnight, precious metals miners 4.61%, REITs 5.49%, airlines 4.41%, transport stocks 3.18% and oilers more than 3%.
Crude futures skidded towards $65 but bounced to recently trade just 1.13% lower at $66.71. Gold futures were pummelled as fear drove investors back to the US dollar. Gold dropped 1.5% to recently trade at $932.60. Base metals sold off hard at the start of the session but most recovered some losses before the close. In London, aluminium lost 1.51%, copper 2.64%, lead 3.33%, nickel 1.23%, tin 4.39%, and zinc 7.07%.
Futures traders expect our market to trade lower for a second day. With 50 minutes left to trade, the SPI futures index was 47 points lower at 4315.
TRADING THEMES TODAY
PROFIT TAKING: If you haven't already locked in profits from this five-week rally, it's time to think about it. Last week's weak US consumer/retail data has given global markets a nasty dose of the flu and it may not pass quickly.
COMPANY REPORTS: Among companies reporting today: CPA, DXS, GWT, JHX, MND, OKN, OST, SGN, SMX and UGL.
BOUNCE TRADES: We should see some panic selling and heavy falls today early in the session and that translates into opportunity for the patient and the quick on the trigger. Look to buy near support, ride the bounce and get out at the first sign the buying is drying up. Today is likely to be a day for small snacks, rather than feasts.
