Shares are set to open sharply lower after China's economic slowdown fuelled Wall Street's worst night of the year and pushed key metals to multi-year lows.
The June SPI 200 futures contract slumped 63 points or 1.3% to 4898 as BHP and Rio Tinto dived more than 5% in US trade, gold suffered its biggest intraday crash since 1980 and copper hit a one-and-a-half-year low.
Losses on Wall Street accelerated into the close amid reports of explosions at the Boston Marathon. The S&P 500 fell 37 points or 2.32% for its largest decline since November. The Dow tumbled 266 points or 1.79% and the Nasdaq lost 2.4%.
The sell-off followed news yesterday that China's GDP grew by 7.7% over the first three months of the year, slowing from a rate of 8% at the end of last year. March industrial production figures were also lower than economists had anticipated.
"The weaker-than-expected China data threw some cold water on the global growth story," a senior manager at BB&T Wealth Management in the US told Bloomberg. "There's been a lot of concern of what the growth trajectory of China would be. Most market watchers have dismissed a hard landing scenario but if the growth rate is below what the current expectations are, that's a drag on global growth."
Resource and energy stocks led the declines as an index of commodities hit its lowest level since July and traders dumped cyclical stocks. BHP fell 6.23% and Rio Tinto 5.9%. The Morgan Stanley Cyclical Index swooned 3.91%, the Dow Transportation Average 3.81% and the Russell 2000 index of small caps 3.78%. The VIX, Wall Street's anxiety gauge, soared more than 40% after recently marking a six-year low.
US economic news did little to improve the downbeat mood. A measure of manufacturing in the greater New York region was weaker than expected and sentiment among home-builders deteriorated this month.
Gold plunged more than 10%, its worst session since 1980 en route to its heaviest two-day decline in 30 years. Gold for June delivery was lately down $153.90 or 10.4% at US$1,347.50 an ounce, a level last seen in 2011. Silver for May delivery dropped $3.22 or 12.2% to US$23.11 an ounce. Platinum and palladium both lost more than 6%.
"There are a lot of people throwing up their hands, throwing positions overboard. Panic is everywhere," Dennis Gartman, editor of the Gartman Letter, told MarketWatch. "I've never seen anything like this."
Industrial metals broke support levels to mark new multi-month/year lows before staging partial recoveries: aluminium its weakest level in three-and-a-half years; copper a year and a half; nickel seven months; and tin, lead and zinc five months. US copper for May delivery was recently down eight cents or 2.4% at US$3.27 a pound. In late trade in London, copper was off 2.7%, lead 0.7%, nickel 1%, tin 4.6% and zinc 0.4%. Aluminium bounced 1.2%.
Oil dropped more than 4% to a four-month low as analysts adjusted their global demand outlooks in the light of slower Chinese growth. West Texas intermediate crude for May delivery was recently down $3.98 or 4.4% at US$87.37 a barrel.
Declining mining stocks steered the major European markets lower, but most finished off their lows. Germany's DAX fell 0.41%, France's CAC 0.52% and Britain's FTSE 0.63%.
TRADING THEMES TODAY
COMMODITY SMASH CONTINUES: A huge win for the bears overnight with the "buy the dip" crowd notable for their absence. That may be partly attributable to the news from Boston, which exacerbated the market's grim mood heading into the close. The mother of all bounce opportunities is coming in precious metals but the overnight action shows just how dangerous it is to anticipate the action in these conditions. Still, if the biggest two-day rout in 30 years isn't a sign of impending capitulation, what is? I'll be looking for overnight holds before the end of the week. Meantime, today, like yesterday, will offer intraday bounce opportunities but errors will likely be punished severely. If you haven't played that game before, study the action and learn where the opportunities lie - big sell-offs offer opportunities to win and lose big because of the expansion in trading ranges.
ECONOMIC NEWS: The minutes from the last Reserve Bank policy meeting are due at 11.30am EST, along with new motor vehicle sales. Europe releases inflation and economic sentiment data tonight. ECB President Mario Draghi is scheduled to address the European Parliament. A busy night in the US includes the consumer price index/core CPI, building permits, housing starts, industrial production and capacity utilisation.
