Australian stocks face opening losses after a record rise in coronavirus cases a week out from the presidential election helped drive US stocks down more than 2 per cent.
ASX SPI200 index futures skidded 55 points or 0.9 per cent as the Dow lost 650 points during its worst session in seven weeks.
A share market that had appeared oblivious to the pandemic in recent months finally cracked overnight following back-to-back record daily tallies in the US over the weekend. The nation recorded more than 83,000 new cases on Friday and Saturday, smashing the July high of 77,300 cases.
The Dow Jones Industrial Average tumbled 650 points or 2.29 per cent. Twenty-nine out of thirty component companies declined. The broader S&P 500 shed 64 points or 1.86 per cent. The Nasdaq Composite lost 189 points or 1.64 per cent.
Hardest hit were companies most exposed to potential lockdowns. The S&P 1500 airlines index skidded 5.8 per cent. Cruise companies Carnival and Norwegian fell 8.7 and 8.3 per cent, respectively. Hyatt Hotels lost 5 per cent and an index of casinos 4.2 per cent.
Lockdown fears were sharpened after the Texan city of El Paso imposed a night-time curfew and asked citizens to stay home for two weeks as a surge in cases threatened to overwhelm hospitals. European stocks slumped after Italy and Spain lurched back towards lockdown.
Investors also appeared to give up on a stimulus deal before next Tuesday’s election following downbeat comments from negotiators. White House economic advisor Larry Kudlow said there were parts of the proposed Democrat stimulus package President Donald Trump could not accept. House Speaker Nancy Pelosi accused the White House of “official malfeasance” by failing to stop the spread of the virus.
“The double whammy of a stalled stimulus bill and new highs in cases is a harsh reminder of the many worries that are still out there,” Ryan Detrick, chief market strategist at LPL Financial, told CNBC. “Most of the recent economic data has been strong, but when you see parts of Europe going to back to rolling shutdowns, it reminds us this fight is still far from over.”
The day ahead looks like a test of investor willingness to differentiate the relatively bright domestic outlook – low Covid-19 infection rates, Victoria emerging from lockdown, stimulus package in place – from the much darker picture overseas – record US cases, US stimulus stalled, European nations locking down.
Futures trading suggests the S&P/ASX 200 will open near the 6100 level. When the index hit that level on Thursday, investors “bought the dip” and the index closed more than 70 points higher at 6174. Whether they will be as willing this session remains to be seen. Just as a rising tide lifts all boats, an ebb-tide tends to bring everything down with it. The index eased 0.2 per cent yesterday to a third straight loss.
The Reserve Bank will be in the spotlight once again as Deputy Governor Guy Debelle and Assistant Governor Michele Bullock testify before the Senate Economics Legislation Committee from 1.30 pm EST. Bullock is also scheduled to deliver a speech tonight.
All 11 US sectors ended in the red. Traditional defensive sectors such as utilities, health and real estate fared best with falls of between 0.04 and 1.2 per cent. The energy sector dived 3.5 per cent, materials 2.5 per cent and financials 2.2 per cent.
The dollar held its ground during a rush into the US dollar as investors rotated into havens. The Aussie was lately down a modest 0.07 per cent at 71.29 US cents.
Oil slumped more than 3 per cent as traders digested the demand implications of a new wave of lockdowns just as Libya resumes exporting. Brent crude settled $1.31 or 3.1 per cent lower at US$40.46 a barrel.
“It’s a dark Monday in the oil market,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, told Reuters. “We have long warned that a ‘second wave’ of strict coronavirus restriction measures could be re-imposed, and it’s now happening for real.”
While gold resisted the broader downtrend on financial markets, gold companies were dragged lower. The NYSE Arca Gold Bugs index dropped 1.2 per cent. Gold for December delivery settled 50 cents or less than 0.1 per cent higher at US$1,905.70 an ounce.
Iron ore ticked lower. The spot price for ore landed in China dipped 55 cents or 0.5 per cent to US$115 a tonne. BHP’s US-listed stock shed 2 per cent and its UK-listed stock 1.79 per cent. Rio Tinto gave up 2.21 per cent in the US and 2 per cent in the UK.
Copper declined for a third straight session during a downbeat session on the London Metal Exchange. Benchmark copper fell 1.3 per cent to US$6,760.75 a tonne. Aluminium lost 0.9 per cent, nickel 0.3 per cent, lead 0.4 per cent, zinc 0.8 per cent and tin 2 per cent.