Record night on Wall Street to boost ASX

A wretched week for Australian investors looks set to bring more pain after US stocks slumped more than 4 per cent overnight into a technical correction.

The ASX 200 erased the last of its 2020 gains yesterday as a fifth day of falls wiped 50 points or 0.8 per cent off the index. The benchmark looks poised to open near correction territory - defined as a retrace of 10 per cent from a peak - when trade commences this morning after tumbling 504 points or 7 per cent in five sessions since last Thursday. SPI200 index futures plummeted 164 points or 2.4 per cent overnight to 6452. 

A sixth night of losses extended the rout on Wall Street as Americans fretted about the spread of the coronavirus in the US. The S&P 500 plunged 138 points or 4.42 per cent to its weakest close since last October. The Dow shed 1,191 points or 4.42 per cent, the second time this week the blue-chip average has dived more than 1,000 points. The points loss was the Dow's largest ever. The Nasdaq lost 414 points or 4.61 per cent during its worst session in more than eight years.

US benchmarks are on track for their worst week since the GFC after another horror session. The declines came as Americans confronted headlines about the slow but steady spread of the Covid-19 virus within the US. While US President Donald Trump reassured Americans that the risk of infection was "very low", the governor of California said 33 people had tested positive and the state was monitoring at least 8,400 others.

Stock markets around the globe have plunged after companies warned the virus was impacting supply chains and sales. Microsoft yesterday became the latest to warn it will miss its revenue guidance for this quarter, citing problems in its Chinese supply chain. Payments provider PayPal downgraded its revenue guidance overnight after observing a decline in international e-commerce. Bellwether Apple was one of the triggers for the stock market turmoil after reporting last week that it would miss its revenue target for this quarter.

“US companies will generate no earnings growth in 2020,” David Kostin, chief US equity strategist at Goldman Sachs, told CNBC. “Our reduced profit forecasts reflect the severe decline in Chinese economic activity in 1Q, lower end-demand for US exporters, disruption to the supply chain for many US firms, a slowdown in US economic activity, and elevated business uncertainty.”

The selling overnight was broad, with defensive sectors falling alongside frothier momentum stocks. The real estate, energy and technology sectors all lost at least 5.3 per cent. Health was the best of the sectors with a fall of 3.3 per cent.

On the Dow, 3M was the only stock to resist the downtrend, rising 0.8 per cent after an analyst said the company might benefit from sales of respirator masks. Microsoft lost 7 per cent, Apple 6.5 per cent and Boeing 5.8 per cent.

The US materials sector declined almost 4.7 per cent as oil, iron ore and gold all retreated. BHP's US-listed stock shed 3.25 per cent and its UK-listed stock 4.39 per cent. Rio Tinto per cent gave up 4.95 in the US and 5.97 per cent in the UK. The spot price for iron ore landed in China slid $1.95 or 2.2 per cent to US$85.40 a dry ton.

Oil slumped to a 13-month low during a fifth straight losing session. Brent crude settled $1.25 or 2.3 per cent lower at US$52.18 a barrel, a level last seen in December 2018.

A recovery in US bond yields cruelled a rally in gold. Gold for April delivery settled 60 cents or less than 0.1 per cent weaker at US$1,642.50 an ounce after trading as much as $20 higher. The US bond yield recovered from a fresh record low earlier in the session.

The dollar bounced 0.55 per cent overnight to 65.79 US cents.

The interim reporting season winds up today, with Harvey Norman and Silex Systems among the last to deliver. Economic data has had little to no traction this week. Wall Street has data slated tonight on personal spending and income, and consumer sentiment, as well as the consumer price index and Chicago Business Barometer.  

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