Shares slumped to a seven-week low this morning, sunk by heavy overnight commodity falls and a surprise drop in employment that pulled the dollar lower.
At lunchtime the ASX 200 was off 67 points or 1.4% at 4712 after earlier touching its lowest level since March 24. A general flight to safety saw all sectors except the defensive telecoms sector in the red and small caps hit harder than blue chips. The falls were heaviest in gold -2.4%, metals & mining -2.3% and energy -2.2%.
"Fear and volatility returned to the markets overnight, mostly a reflection of a sea of red in commodity markets and a subsequent bout of risk aversion," Mike Jones, currency strategist at Bank of New Zealand, told Fairfax. "We've seen commodity prices lose ground almost across the board, driven by some sharp losses on oil and gas prices."
The dollar dropped nearly a cent this morning after a dip in full-time employment reduced the odds on near-term interest rate rises. The dollar briefly dipped under US $1.06 after the jobs numbers were released before partly recovering to trade recently at US $1.0619.
The economy lost 49,100 full-time jobs last month, according to ABS figures this morning, the biggest fall in more than two years. However, the unemployment rate held steady at 4.9%.
"The only silver lining to this data is that it should provide the RBA with further evidence that it should keep its hands off the economy, and allow everyone some stability in their funding costs, enabling greater productivity," economist Clifford Bennett told Fairfax. "The only answer to a higher Australian dollar, partly driven by the RBA having raised rates too far in the first place, is a strong productivity drive which will generate more jobs in the future."
Asian markets took their cue from a weak overnight lead from Wall Street. Japan's Nikkei fell 0.79%, Shanghai 0.6% and Hong Kong's Hang Seng 0.98%. Dow futures were recently at +1.
Crude oil futures rallied 88 cents this morning to US $99.48 a barrel. Spot gold was $4 stronger at US $1,504.50 an ounce. Spot silver recovered 40 cents at US $35.55.
A morning for quick fingers and quicker thinking. Most of the volatility came in the first half hour before the jobs data sparked that second down-leg. I dumped the last of my silver at the open for a fraction of the profit I imagined when I went to bed last night. (Barny, thanks for your thoughts this morning - I'll look for further weakness from here before considering another entry.) Traded the opening runs in JHX and ALK. Break-even in CRZ when it lost altitude. Also grabbed SUM. Well done to the MOO mob.
