Morning traders. Thanks Trees and after-market regulars.
Market wrap:
The share market is primed for a new eight-month low at today's open after Wall Street's worst week in more than two years ended with a rout in tech stocks.
The December SPI 200 futures contract retreated 38 points or 0.75% to 5120 on Saturday morning as BHP fell to its lowest level in more than five years in US trade after China unexpectedly announced tariffs on coal imports.
US stocks last week recorded their sharpest declines since May 2012. The S&P 500 fell fell 22 points or 1.15% on Friday to end the week with a loss of 3.1%. The Dow dropped 115 points or 0.69% on Friday for a weekly loss of 2.7%, while the tech-heavy Nasdaq gave up 102 points or 2.34% for the session and around 4% for the week. While the S&P 500 ended the week at a major support level, the Dow and Nasdaq both broke long-term trend support. All three indexes have declined for the last three weeks.
Analysts attributed the sell-off in equities to worries about slowdowns in Europe, Japan and China as the US Federal Reserve prepares to raise interest rates to control an up-swing in US growth. Neither the European Central Bank or People's Bank of China have moved aggressively enough to prevent a recent run of weak economic signals continuing. Germany's Economics Ministry warned on Friday that the economic outlook for the world's fourth-largest economy had deteriorated.
"In a vacuum of policy response, investors are selling first and asking questions later," Jim McDonald, chief investment strategist at Northern Trust Asset Management in the US, told Reuters. "It smells like there is a high degree of involvement from systematic traders, rather than fundamental traders. The magnitude of the move has been disproportionate to the change in the fundamentals."
The tech sector in the US was rattled by gloomy outlooks from the first companies to report quarterly earnings. Market heavyweights such as Microsoft, Intel and Cisco tumbled after earnings from Microchip Technology and Juniper Networks disappointed. Microchip Chief Executive Steve Sanghi warned of an industry-wide correction as revenues from China decline.
Wall Street's "fear gauge", the VIX, jumped another 13% on Friday to top its February high for the first time and extend its total gain over the week to 46%. The change reflects an upsurge in volatility that saw the S&P 500 move by more than 1% on each of the last four sessions of the week. The benchmark share index ended the week 5.2% off its September all-time high.
Australia's largest miners extended recent weakness in US trade as analysts weighed the impact of new Chinese tariffs on coal profits. BHP lost 2.71% and Rio Tinto 2.45%. Around 20% of BHP's coal exports go to China. Rio Tinto's coal exposure to China is significantly smaller, according to Fairfax. Spot iron ore for import to China edged up 40 cents on Friday to US$79.90 a dry tonne.
Oil hit a four-year low before reversing as increasing supplies from the US and Russia continue to outweigh softening demand. West Texas Intermediate crude oil for November delivery settled five cents higher at US$85.82 a barrel after falling as low as US$83.59.
Gold made a modest dent in its first weekly advance in six weeks. Gold for December delivery eased $3.60 or 0.3% to US$1,221.70 an ounce but finished the week ahead by 2.4% as traders sought havens from the volatility in equities.
Base metals reversed Thursday's gains as global investors favoured defensive assets over assets exposed to global growth concerns. In London, copper fell 1.19%, aluminium 1.03%, lead 1.25%, nickel 1.95% and zinc 0.9%. Tin was unchanged. US copper for December delivery edged up three-quarter of a cent or 0.2% to US$3.04 a pound.
"When there is fear in the market, it is difficult to find buyers and the price starts sliding, and this is what we are experiencing for copper," Naeem Aslam, chief market analyst at Ava Trade, told Reuters. "Taper tantrum, fragile European and Chinese growth and strength in the US dollar are the major reasons for the weak demand for copper."
Europe's benchmark index closed its worst week in two years with another heavy fall after soft French and Italian industrial production compounded several days of negative economic signals from Germany. The Stoxx Europe 600 plunged 1.55% as Germany's DAX lost 2.4%, France's CAC 1.63% and Britain's FTSE 1.43%.
The dollar was this morning buying 86.99 US cents.
TRADING THEMES TODAY
US EARNINGS: The gloom on world equity markets may dissipate quickly this week if key US companies report earnings in line or better than market expectations. Quarterly earnings seasons have been choppy but positive for share prices over the last few years and there is no reason yet to think this one will be any different. The key question is the impact of a surging US dollar on earnings. This is the first big week of a new season. Among the highlights: Intel, Citigroup, Wells Fargo, JP Morgan Chase, Johnson & Johnson (tomorrow night); eBay, Bank of America, BlackRock, Amex (Wed); Goldman Sachs, Google (Thu); and Morgan Stanley and GE (Fri).
CHINESE SLOWDOWN?: Expectations are low for a week of Chinese economic data. Trade figures due around lunchtime today (exact time uncertain) are likely to show that imports continued to decline last month following a drop of 2.4% in August - a negative for Australian exporters of raw materials. Loan, money supply and direct investment figures are due on Tuesday or Wednesday. Inflation figures due on Wednesday are expected to show that consumer inflation continues to fall.
ECONOMIC NEWS: The scheduled newsflow from the US is light early in the week but picks up towards the end. Among the highlights: retail sales/core retails sales, PPI, Federal Reserve Beige Book (Wed); weekly jobless claims, Philly Fed Manufacturing Index (Thu); and building permits, consumer sentiment and housing starts (Fri). Back home, the highlights include: business confidence (tomorrow); consumer sentiment, vehicle sales (Wed); and inflation expectations (Wed).
