* US stock markets sold off the most in eight weeks, for their worst single session performance since July, on the back of geopolitical concerns, a sell off in tech stocks and weaker durable goods orders.
* Asian stock markets recovered from four month lows, as investors speculated the Chinese government will support the economy to attain its 7.5% growth target.
* Asian stock markets closed lower around four month lows, despite better Chinese PMI data.
* Commodities prices generally higher. Gold prices eased to US1,219, while crude-oil rose to $US92.80. Copper edged higher to US3.054c, Iron prices fell to new pre-GFC lows of $US78.60 a tonne.
The Australian sharemarket has closed modestly higher yesterday, paring back early gains, with the ASX200 up 0.1% at 5382. The ABS said the number of jobs vacancies in Australia fell in the August quarter 0.7% in seasonally-adjusted terms, which put a dampener on sentiment. The Utilities, Property and Tech sectors all rose 0.6% and the Mining sector rose 0.3%, as BHP and Rio Tinto edged higher. The Energy sector weighed, down -0.3%.
Traders digested the BREE report which said conditions for commodity producers will remain tough in the near-term as fears of oversupply and weakened Chinese demand continue to weigh, but is looking for the iron ore price to average $US94 for the rest of 2014, well below the $US107 a tonne forecast in June. The RBA released its Financial Stability Review, warning the Australian banks that they need to be wary of soaring property prices.
Traders are bracing for further selling on the open today, on the back of selling in overseas markets overnight. Investors are profit taking as we draw to a close of the third quarter.
The SPI 200 futures down -0.9% to 5,320, giving a sharply negative lead for the ASX market today, as the US and Europe sold off overnight. The 5320 level will be key for the ASX200 today. The Australian dollar fell to US87.8c, to fresh eight month lows. Expect volatility on the open as equities settle after options expiry.
The ASX Healthcare sector continues to outperform.
US Markets
US stock markets sold off the most in eight weeks, for their worst single session performance since July, on the back of geopolitical concerns, a sell off in tech stocks and weaker durable goods orders. The US will report on GDP and consumer sentiment on Friday.
The three benchmark indexes all finished down at least -1.4%. Traders have been facing a plethora of issues and until now have been able to climb the wall of worry.
Stock weakness has been attributed to concerns that US tax inversion rule changes that will impact takeover activity, interest rates will rise sooner than expected and geopolitics. We have been seeing a divergence between the large and small cap indexes, which may be indicating underlying weakness in the markets. The tax inversion issue is where companies merge with overseas operations in order to attain more tax effective status and this will impact the attractiveness of multi national M&A deals.
All ten S&P500 sector finished in the red for the session. The tech heavy Nasdaq sold off over -2% led by Apple down -4% after they encountered problems with their iPhone 6 and IOS software release. The S&P500 is still only -1.5% from its recent record high. The Russell 2000 small cap index is still down -4.2% in the week, the biggest fall since last April. Volatility has surged 18% overnight to 15.6.
In economic news US durable goods orders fell -18%, but had been up 22% in July. The main reason for the volatility is due to Boeing who sold 374 at the July Farnborough Air Show in England, then only sold a respectable 109 last month, if you take out aircraft orders then the goods orders would have risen.
For the session Dow Jones closed down -1.5% at 16,945, the S&P500 down -1.6% at 1,965 and the NASDAQ closed down -1.9% at 4,466, while the 10-year Treasuries slumped to 2.51%.
European Markets
European stock markets rebounded from their biggest falls in over two month, as traders speculated the ECB will act on additional stimulus.
The Stoxx Europe 600 finished down -0.8% for the session. The index is still on track for a fifth straight quarterly gain at this point, which would be the longest streak since 2006. The euro dollar slumped to a 14 month low on speculation of further stimulus from the ECB. Across the region the miners weighed again resuming its six session losing streak.
The German market sold off sharply as consumer confidence fell for a fifth straight month, declining to its lowest level in 17 months. The London markets had its biggest slump in over six months, led by the miners, as the BoE reaffirmed that the time for rising rates is getting closer.
For the session the German DAX 30 closed down -1.6% at 9,510, the UK the FTSE 100 closed down -1.9% at 6,739, the French CAC 40 closed down -1.3% at 4,355, while the Spanish market closed down -0.7% at 10,783.
Asian Markets
Asian stock markets recovered from three month lows, as investors speculated on Chinese stimulus and better housing data out of the US. The MSCI Asia Pacific Index rose another 0.3% for the session. The index is still down -4.3% from six year highs. Expect weakness across the boards after the bears took a grip on US and European markets overnight.
The Chinese market consolidated recent gains, trading near its highest close since March 2013, but the energy sector weighed as coal producers sold off on news that coal use for energy generation will be restricted. Goldman Sachs has cut its 2015 economic growth target for China to 7.1% down from 7.6%. The Hong Kong market sold down again and is down -7.6% from its high for the year, reached earlier this month.
The Japanese market traded at seven year highs, after S&P Ratings Agency reaffirmed its long term AA- sovereign credit rating, but the outlook remains negative, despite Abenomics.
For the session the Shenzhen Composite closed down -0.2% at 2,436, the Hong Kong Hang Seng closed down -0.6% at 22,768, and the Japanese Nikkei closed up 1.3% at 16,374, while the South Korean KOSPI closed down -0.1% at 2,034.
ASX News
ALZ – The Singapore bidder for Australand will complete its takeover of the property developer by buying the remaining batch of securities it does not already own.
BHP Billiton is considering listing its new resources entity NewCo on the London stock market. Employees at Chile’s Escondida mine, the world’s largest copper mine and part owned by BHP and Rio Tinto, have gone on strike for the second time this week to demand better working conditions.
BKW – Brickworks says that Sydney’s property boom is creating the best market for building product makers in a decade, according to Australia’s largest maker of bricks and tiles.
BNO – Bionomics the biopharmaceutical company is buying France’s Prestwick Chemical, which specialises in research and development services in early drug discovery, for EUR270,000.
GFF – The ACCC has cleared the way for an Asian consortium to buy Australia’s biggest foodmaker, Goodman Fielder.
IRON_ORE – Iron ore stocks steadied even though the iron ore price has fallen to lows not seen since the GFC.
LYC – Lynas Corporation the rare earths miner is in a trading halt as it prepares to reveal details of a new funding deal.
NUF – Nufarm share rose another 4% after yesterday saying it was confident of delivering earnings growth in 2015.
RIO – Morgan Stanley upgraded Rio Tinto to overweight (target $75), suggesting the company is in a position to reinvest and return money to shareholders on the back of improving cash flows.
SOL – Weakness in the resources sector has taken the shine off Washington H Soul Pattinson’s full year profit, despite stronger results from its TPG Telecom and Brickworks investments.
TPM – TPG Telecom the internet provider has reported FY profit up 15%, earnings up 20% and forecasts growth.
Market Summary
ASX – to open higher
US & Europe – higher
ANZ 0.6%, NAB 0.1%, NWS -0.2%, STO 1.0%, WPL 0.6%
AWC 2.6%, BHP 1.2%, RIO 1.6%, NEM -0.6%, NCM -1.9%
By Michael Hevern D2MX Investment Advisor For trade ideas and recommendations on how to trade in this market, sign up for a free trial of the D2MX Daily Trading Report, call 1300 610 024 or email advisory@d2mx.com.au.