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Record night on Wall Street to boost ASX

Aussie shares are set to open deep in the red following heavy losses on world markets after an upsurge in coronavirus cases outside China stoked fears of a global slowdown.

The local market, which suffered its biggest fall in six months yesterday, faces more pain after index futures sank 167 points or 2.4 per cent overnight. The plunge suggests the ASX 200 will erase most of this year's gains at today's open, following a 2.25 per cent decline yesterday.

The overnight numbers make ugly reading. The Dow dived more than 1,000 points during its worst night in two years. The S&P 500 shed its gains for 2020. Wall Street's "fear gauge", the VIX, jumped to its highest level since last January. Europe endured its worst session since 2016. Oil fell more than 5 per cent. Mining heavyweights BHP and Rio Tinto lost more than 5 per cent in overseas trade. The dollar dropped below 66 US cents to a new 11-year low.

Stock markets that were trading at record highs as recently as last Wednesday have caved in over the last few sessions amid evidence that the Covid-19 virus is no longer primarily a Chinese problem. Explosions of new cases in Italy, Iran and South Korea over the weekend triggered a classic 'flight to safety' as local authorities scrambled to close borders and impose quarantines.

When the closing bell rang this morning, the S&P 500 had shed 112 points or 3.35 per cent. The Dow suffered its second heaviest intraday points drop of all time, ending 1,032 points or 3.56 per cent in the red. The tech-heavy Nasdaq took the biggest hit, losing 355 points or 3.71 per cent.

Italy's leading stock index, the FTSE MIB, tumbled 5.43 per cent after local authorities quarantined swathes of its northern industrial heartland. The pan-European Stoxx 600 shed 3.79 per cent. South Korea's Kospi lost 3.9 per cent yesterday.

There had been a disconnect in financial markets for weeks, with bonds and gold indicating trouble on the horizon even as stock markets scaled new heights. Stock traders now appear to have thrown in the towel. So what changed? Essentially, what was seen primarily as a Chinese problem is now acknowledged to be much broader, with significant footholds in Europe, the Middle East and other parts of Asia. On Friday, the economic impact of the virus was highlighted by a contraction in US business activity. Overnight, Goldman Sachs slashed its Q1 growth expectations for the US to 1.2 per cent from 1.4 per cent, citing the effects of the virus.

All 11 US sectors declined, with energy and technology faring worst and defensive utilities and real estate doing best. Stocks exposed to Chinese supply and demand copped it hard. Apple lost 4.75 per cent, an index of airlines 4.82 per cent and an index of tech stocks 4.07 per cent. BHP's US-listed stock fell 5.05 per cent and its UK-listed stock 5.52 per cent. Rio Tinto gave up 6.22 per cent in the US and 5.64 per cent in the UK.

Iron ore continued to resist the cold winds blowing through commodity markets. The spot price for iron ore landed in China eased a modest 60 cents or 0.7 per cent to US$91.20 a dry ton.

Oil fell more than 5 per cent on demand fears. Brent crude settled $3.20 or 5.5 per cent lower at US$55.27 a barrel. The US benchmark lost 4.9 per cent.

Gold jumped almost 2 per cent before paring its gains. Gold for April delivery settled $27.80 or 1.7 per cent head at US$1,676.60 an ounce before easing recently to US$1,661.10.    

Zinc saw its weakest price since 2016 and nickel a seven-month low as industrial metals sold off on the London Metal Exchange. Zinc was down 3.3 per cent at US$2,046 a tonne in final open outcry trading. Nickel slipped 0.8 per cent, copper 1.3 per cent, aluminium 0.9 per cent, lead 0.6 per cent and tin 0.5 per cent.

The dollar was recently down 0.36 per cent at 66.03 US cents after trading below 66 cents.

On a thankless day to report earnings, Caltex, Oil Search, Alumina, Estia Health, Blackmores, Appen and Qube Holdings are among those on the chopping block.

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