Market wrap: Australian stocks are set to open at a 10-week low after resurgent fears over sovereign debt brought heavy losses in Europe and the U.S.
With 15 minutes left to trade, the June SPI futures contract was down 105 points or around 2% at 4639.
Key European markets all fell by at least 2.5% after the euro plunged to a one-year low as doubts grew about the debt outlook for troubled southern European nations. Wall Street suffered its sharpest sell-off in three months and commodity prices were hammered by a soaring U.S. dollar. The Dow dropped 225 points or 2.02%. The S&P 500 fell 2.38% and the Nasdaq tumbled 2.98%.
Greece agreed on Sunday to austerity measures in return for a 110 billion-euro bailout, but markets were spooked overnight by news that Greece has hired Lazard, an expert on debt restructuring, for financial advice and by reports that German finance minister Wolfgang Schaeuble said Greece could become insolvent.
The Greek ASE Composite index fell 6.7%, Portugal's PSI 20 index dropped 4.2% and Spain's Ibex 35 index fell 5.5%. Other European markets were savaged as banks holding sovereign debt were sold off. Britain's FTSE dropped 2.56% with heavy falls for Rio (-6.4%) and BHP (-7.9%). Germany's DAX dropped 2.6% and Franc's CAC 3.64%.
"The aid package is on the table but there is fear that it won't pass in German parliament. Markets are also not sure that the Greek government will be able to implement the measures," the head of research at BNP Paribas Fortis told MarketWatch.
U.S. markets were also suffering the after-effects of an oil spill in the Gulf of Mexico and the return of terrorism to American streets.
"It's like a triple whammy," a senior trader told Bloomberg. "The threat of terrorism just adds to investors' concern about Europe's debt situation and a China slowdown. The more we hear about the car bomb suspects, the more we get spooked, especially because it's in New York."
U.S. treasury prices hit a two-month high and the dollar index, which tracks the greenback against a basket of six major currencies, rallied 1.33% as investors sought "safe havens".
Crude oil futures suffered their heaviest one-day fall since February, crunched by a rising dollar, falling equities and signs of a slowdown in China. Crude futures were recently trading $4-.4 or 4.7% lower at $82.16 a barrel after a Chinese purchasing managers index yesterday eased in April, suggesting the country's industrial rebound may be slowing. Read more here
Industrial metals suffered heavy losses, with many plunging to multi-month lows. In London, copper slumped 5.6%, aluminium 4%, lead 7.8%, nickel 7.4%, tin 3% and zinc 6.7%.
Precious metals were dragged down with equities and other commodities. The spot gold price was recently $11.20 or 1% lower than Monday's New York close at $1,171.10 an ounce.
TRADING THEMES TODAY
BOUNCE SCALPING: That's as grim an overnight lead for our market as I can recall. But where there's muck, there's brass. There should be some spectacular trades this morning as some short-sellers use panic openings to lock in profits. Our market has been falling for more than two weeks now and I'll be surprised if we don't see some sort of recovery today after the opening carnage. Look for oversold stocks that have been falling for a few days (plenty out there) and which open near a key support level with plenty of buyers. Be especially wary of resource stocks. I'll continue to stick to intraday trading until the outlook improves.
MINERS CONFRONT RUDD: "Kevin Rudd was last night locked in tense discussions with the nation's most senior mining executives as industry leaders ratcheted up their campaign against Canberra's super-profits tax." That's the lead story on The Australian website this morning. Let's hope the talks force a government rethink on the proposed tax after the havoc it wreaked yesterday on our mining sector. Read more here
ECONOMIC NEWS: The monthly Performance of Services Index is due at 9.30 am. Monthly building approvals are due at 11.30 am. The main interest tonight in the U.S. is jobs in the form of non-farm employment data and yearly job cuts. Also due: non-manufacturing PMI and crude oil inventories.
