Regional markets slumped this morning as US futures flagged a weak start to tonight's trade amid a slowdown in Chinese manufacturing and a sell-off in financial shares.
At lunchtime the ASX 200 was off 81 points or 1.7% at 4650, eradicating last week's gains and trading near last Monday's eight-week closing low. All sectors were trading lower, with the financials sector suffering its biggest fall in nearly a year following heavy losses among financials in New York on Friday.
Australian banks "have been fingered by a number of commentators as good shorts," CMC Markets chief market strategist Michael McCarthy told Fairfax. "The call is that those looking for short exposures to the Australian market have piled into the banks around the idea of the two-speed economy.
"Those banks that are exposed particularly to the east coast economy are likely to have real problems in loan book growth. So it's no surprise that Westpac is the hardest hit in that scenario, with its high proportion of lending in NSW."
Asian markets hit the skids this morning ahead of the 12.30 pm release of monthly Chinese manufacturing data. Japan's Nikkei fell 1.38%, Shanghai 1.07% and Hong Kong's Hang Seng 1.59%.
China's manufacturing declined to its slowest pace in 10 months, according to data released this morning. HSBC's flash manufacturing purchasing managers' index slowed to 51.1 this month from 51.8 in April. Readings above 50 indicate expansion.
Dow futures were recently at a bearish -54 or -0.4% following a jump in the US dollar this morning as the euro continued to lose ground. The Australian dollar dropped more than half a cent, recently buying US $1.0583.
"The US dollar is lifting against pretty much every currency and the Aussie dollar is just getting caught up in that," Commonwealth Bank currency strategist Joe Capurso told Fairfax. "Most of the Asian equities, including Australia, are lower so you've got the usual 'safe-haven' bid into the safety of the US dollar."
Crude oil futures slumped 99 cents or 1% this morning to US $99.09 a barrel during a general retreat from risk. Spot gold gave up early gains to trade recently $5.20 weaker at US $1,508.30 an ounce.
Downhill all the way this morning. Did the Chinese manufacturing number leak over the weekend? Would explain why Asian markets started the week in such a funk. Recently the market seems to be getting some pretty accurate "whisper numbers" before the official Chinese releases. With all the volatility, I spent the morning trying to pick turns in mid-caps. Traded TOL, MQA and OST successfully. Still holding IAG and DJS.
