A broad retreat pulled all sectors lower this morning as the Australian share market reacted to Wall Street's heaviest fall in four months and the government's downgraded growth outlook.
At lunchtime the ASX 200 was down 34 points or 0.75% at 4537 after dropping to 4523 in early trade. Consumer staples, down 0.1%, was the pick of the sectors on a morning when defensive and cyclical sectors alike were sold off. Materials fell 1.2%, health 1.1%, telecoms 1.1% and financials 0.6%
"Markets have had a pretty strong rebound already," Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors in Sydney told Bloomberg. "The outlook for company earnings is being revised down and that's affecting market sentiment. Any market correction is good and likely to be short-lived as investors will likely use any weakness as a buying opportunity. Even though earnings are slowing, they're not collapsing."
Treasurer Wayne Swan this morning cut the government's GDP forecast for this financial year as he announced $16.4 billion in savings aimed at returning the budget to surplus. GDP is expected to grow at 3% this year, 25 basis points less than the government predicted in May. Read more here.
Japanese stocks led declines in Asia after exports slumped 10.3% year on year last month. The Nikkei dropped 0.77%, Shanghai lost 0.42% and Hong Kong's Hang Seng edged up 0.17%. Dow futures were recently up 13 points or 0.1%.
Crude oil futures dropped as low as US$89.49 before bouncing to US$90.06 a barrel, eight cents below Friday's close. Spot gold was 50 cents stronger at US$1,722.10 an ounce. The dollar was buying $US1.032.
Further evidence, if any were needed, that this remains a "buy the dip" market. Oil and gold both dropped at this morning's open before turning higher. As a trader I'd like to see a good capitulation to bring us back to cheaper levels but this market is nowhere near that point. MEO offered the best bounce trade of the morning but my trading software seized up at the critical moment. CGF is in the buy zone but there's no sign yet that they'll let it run. DYL is starting to look very promising from Friday. CNX still has to find a base.
