Local shares are poised to extend losses as a wave of late selling in the US drove the Dow and S&P 500 lower.
What you need2know
SPI futures down 47pts to 5080
AUD at 71.28 US cents, 84.79 Japanese yen, 62.09 Euro cents and 45.45 British pence
On Wall St, S&P 500 -1.3%, Dow -1.4%, Nasdaq -0.4%
In Europe, Stoxx 50 +4.7%, FTSE +3.1%, CAC +4.1%, DAX +5%
Spot gold down $US14.23 or 1.2% to $US1140.88 an ounce
Brent crude up 16 US cents or 0.4% to $US42.85 a barrel
Iron ore adds 0.3% to $US53.45 per tonne
What’s on today
Australia construction work done, Remarks by Glenn Stevens, Reserve Bank of Australia governor, at the National Reform Summit, Sydney; US durable goods
Stocks in focus
Citi analysts continued to make more downgrades than upgrades to earnings in the past week of reporting. Resources have been impacted by lower commodity price forecasts as well, but downgrades have also continued to be prevalent for Industrials.
Earnings results are expected from companies including: BC Iron, Worley Parsons, APA Group, Westfield, Drillsearch, Seven Group Holdings
Commonwealth Bank’s Richard Grace forecasts that the AUD/USD exchange rate will remain more sensitive to commodity export prices than commodity export volumes. “The RBA have demonstrated they also remain more sensitive to changes in Australia’s real gross domestic income growth, than changes in Australia’s real GDP growth. The RBA have reduced interest rates to 2.0 per cent in response to the changes in these relative growth rates and the relationship between RBA movements and these relative growth rates is strong. The risk is further RBA interest rate cuts, with the market fully pricing a 25bpt rate cut by February 2016. Adding to easier financial conditions, the AUD/USD exchange rate has depreciated 35 per cent since mid 2011. We anticipate a further depreciation below 0.7000 in AUD/USD is coming.”
Copper for delivery in three months gained 2.3 per cent to $US5065 a metric ton ($US2.30 a pound) at 5.50pm on the London Metal Exchange. On Monday, prices touched $US4855, the lowest since July 2009. Copper for immediate delivery is trading at a $US33 premium to the metal for delivery in three months, the biggest spread since January 30.
A measure of oil-price fluctuations climbed Monday to the highest level since April. The Chicago Board Options Exchange Crude Oil Volatility Index closed at 50.11 Monday, signalling the largest price fluctuations since April 1. The gauge of hedging costs on the US Oil Fund, the biggest exchange-traded fund tracking WTI, is down 5 per cent Tuesday.
A rebound that took the Dow Jones Industrial Average up more than 440 points disappeared as traders said trepidation over what will happen in China’s market made holding on to stocks too risky for most investors.
The 30-stock index slid 1.3 per cent to 15,665.77 at 4pm in New York, down 4 per cent from its highest point. The peak-to-trough retreat matched Monday’s selloff, when concern about global growth ignited the worst selloff in four years. The Standard & Poor’s 500 Index went from up 2.9 per cent to down 1.4 per cent, with most of the selling concentrated in the final two hours of trading.
“We just saw a crazy evaporation of gains after being up the majority of the day,” said Stephen Carl, principal and head equity trader at Williams Capital Group LP. “People are nervous about the potential volatility that could erupt or resurface in the market. They’re not sure what’s going to happen overseas, and that uncertainty is winning out.”
European shares rose more than 4 per cent on Tuesday, their best one-day gain since late 2011, as a rate cut in China fuelled a recovery from a bruising 48-hour sell-off. Battered mining and technology stocks were among the big winners when China moved to support its stuttering economy and a plunging stock market that had sent shockwaves around the globe.
In London, Britain’s top share index rebounded after dropping to its lowest level since 2012 in the previous session. It had fallen for 10 straight days as concerns about China’s economy mounted.
The FTSE 350 mining sector was up 4 per cent from its lowest levels since 2009. Base metals rose modestly. Antofagasta was up 8.7 per cent, the top FTSE 100 riser. It said it was targeting savings of about $US160 million this year, and rebounded from its lowest levels in over six years. Glencore rallied as much as 8 per cent from all-time lows hit on Monday, and last traded 4.6 per cent higher. Matthew Tillett, senior UK equity fund manager at Allianz, said that the falls in mining stocks made them good sources of value, despite their exposure to volatility in China, the world’s biggest metals consumer. “(There is) more clear value out there than there was two or three months ago,” Tillett said.
What happened yesterday
The benchmark S&P/ASX 200 index reached a nadir of 4928.3 shortly after opening but then performed, at its peak, an impressive 223 point turnaround – equivalent to a 4.5 per cent intraday rally. The index ended the day up 136 points at 5137.3 or 2.7 per cent, while the broader All Ordinaries index closed 130 points, or 2.6 per cent, higher at 5143.8.