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A fierce share market sell-off looked set to continue at today’s open following further losses on Wall Street and an extension to Victoria’s economic lockdown.
The local market was poised to open at its weakest level in at least four weeks. ASX SPI200 index futures fell 36 points or 0.6 per cent before the Victorian Government released a controversial ‘roadmap’ out of lockdown that leaves Melbourne under significant restrictions until at least October 26.
Wall Street
US stocks closed in the red, but well off their session lows ahead of the Labor Day long weekend market holiday. A volatile session saw the S&P 500 fall as much as 3.1 per cent before trimming its loss to 28 points or 0.81 per cent.
A tech-led rout inflated the Nasdaq Composite’s two-session loss to almost 10 per cent before a partial reversal trimmed the final deficit for the session to 145 points or 1.27 per cent. The Dow Jones Industrial Average benefitted for a second session from a rotation out of momentum stocks into value plays, losing a modest 159 points or 0.56 per cent.
“You had a significant sell-off on Thursday, some follow-through in the morning and then we stabilised,” Baird market strategist Michael Antonelli told Reuters. “The fact we stabilised today could be a good sign.”
The megacap tech stocks that had led an increasingly narrow market rally over the last few months finished mostly lower. Amazon, Facebook and Alphabet each lost at least 2 per cent. Apple and Tesla both plunged more than 8 per cent before swinging to positive finishes.
Banks and other companies that depend most on a strong economy outperformed. Bank of America climbed 3.4 per cent, JPMorgan Chase 2.2 per cent, cruiseline Carnival 5.4 per cent and the S&P 1500 airlines index 1.9 per cent.
Aussie outlook
The S&P/ASX 200 staggered into the weekend with its heaviest loss in four months: 187 points or 3.1 per cent. How the local market emerges will depend to a significant extent to the reaction to Victoria’s roadmap out of lockdown.
There were howls of disappointment from business leaders over the weekend after the state government unveiled a cautious roadmap to reopen the economy in several conditional stages but offered beleaguered businesses no immediate relief. While the first stage will commence on September 13, most restrictions will remain for at least another seven weeks
“We cannot open up at this time,” Victorian Premier Dan Andrews said. “If we were to, we would lose control very, very quickly.”
The announcement is the X factor for today’s share market action after Wall Street showed tentative signs of reversal on Friday. US markets remain closed tonight for Labor Day, leaving the local market with two sessions without fresh leads from the US.
One blessing for local exporters from last week’s dramatic market plunge was a retreat in the dollar from two-year highs. The Aussie started a new week 0.07 per cent ahead at 72.89 US cents, more than a cent and a half below last week’s peak.
This week’s domestic economic calendar looked steady, but without significant market risks. Reports on August job ads and services sector activity were due this morning, along with Chinese trade figures.
Commodities
Mining giants BHP and Rio Tinto rebounded in overseas action despite Friday’s bloodletting here. BHP’s US-listed stock gained 1.05 per cent and its UK-listed stock 1 per cent. Rio Tinto put on 2.07 per cent in the US and 1.61 per cent in the UK. The spot price for iron ore landed in China declined $2.10 or 1.6 per cent to US$128.70 a dry ton.
Oil settled at its lowest level since the second week of July as a rising dollar pressured commodity prices. Brent crude settled $1.41 or 3.2 per cent weaker at US$42.66 a barrel. The US benchmark, West Texas Intermediate crude, fell 3.9 per cent to US$39.77, its first close below US$40 in almost two months.
Gold faded for a third day after a rebound in US jobs boosted the greenback and dulled demand for havens. Gold for December delivery settled $3.50 or 0.2 per cent lower at US$1,934.30 an ounce. The US unemployment rate shrank to 8.4 per cent last month from 10.2 per cent as the economy regained 1.4 million jobs.
Copper hit a two-year high on the London Metal Exchange as falling inventories offset dollar strength. Benchmark copper rose 2.4 per cent to US$6.729.50 a tonne. Aluminium gained 0.3 per cent, nickel 1.3 per cent, lead 1.6 per cent and tin 0.1 per cent. Zinc slipped 1.2 per cent.
