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A fourth day of heavy losses on Wall Street points to further pain for Australian shareholders after a global sell-off continued overnight.
US stocks shed more than 3 per cent after authorities warned Americans to prepare for the prospect that the coronavirus epidemic will get significantly worse. The major indices finished near their lows as bond markets signalled a possible recession.
Australian index futures slumped 162 points or almost 2.4 per cent to 6664. An open around those levels would erase the last of the market’s 2020 gains following three days of selling that have already stripped almost 300 points off the benchmark index.
The spread of the Covid-19 virus continued to sew fear as new infections were reported in Spain, Austria, Switzerland, Croatia and Romania, and the number of confirmed cases in Italy increased by almost 50 per cent in 24 hours. Wall Street fell steadily after the Centers for Disease Control and Prevention warned Americans to prepare for the worst.
“It’s not so much of a question of if this will happen anymore, but rather more of a question of exactly when this will happen,” Doctor Nancy Messonnier, director of the US National Center for Immunization and Respiratory Diseases told reporters. “We are asking the American public to work with us to prepare in the expectation that this could be bad.”
The S&P 500 shed 98 points or 3.03 per cent just a day after its worst decline in two years. The Dow narrowly avoided a second-straight quadruple-digit loss with a decline of 879 points or 3.15 per cent. The Nasdaq lost 256 points or 2.77 per cent.
US stocks have fallen more than 7 per cent in four sessions since last Wednesday’s record close. Tech darlings Apple and Facebook have already entered technical corrections, down more than 10 per cent from their peaks.
The yields on ten-year and thirty-year US government bonds hit record lows in a sign traders expect the global economy to slow significantly. The drop in yields indicated high demand for the safety of government bonds, a traditional defensive asset in times of economic strife.
The VIX or Volatility Index climbed 14.7 per cent to its highest level since December 2018. Its Australian counterpart hit a six-month peak yesterday.
All 11 US sectors fell, with defensives once again outperforming riskier assets. Consumer staples and utilities were the best of a bad bunch with losses of 1.8 per cent and 2.2 per cent, respectively. The materials sector dropped 4.3 per cent, industrials 4 per cent and financials 3.4 per cent. BHP’s US-listed stock shed 2.27 per cent and its UK-listed stock 1.62 per cent. Rio Tinto gave up 1.58 per cent in the US and 1.26 per cent in the UK. The spot price for iron ore landed in China eased $1.10 or 1.2 per cent to US$90.10 a dry ton.
The US energy sector slumped 4.3 per cent as crude touched two-week lows. Brent crude settled 43 cents or 0.8 per cent weaker at US$55.87 a barrel.
Gold was hit by a bout of profit-taking after scaling seven-year highs. Gold for April delivery settled $26.60 or 1.6 per cent lower at US$1,650 an ounce.
Industrial metals attempted a rally during Asian trade yesterday, but finished mixed as European stocks declined. Benchmark copper on the London Metal Exchange eased 0.1 per cent to US$5,685 a tonne. Aluminium and nickel gained 0.2 per cent, lead 2.1 per cent and tin 1.1 per cent. Zinc shed 0.8 per cent.
The dollar continued to hover around the 66 US cent mark, lately down 0.12 per cent at 65.96 US cents.
The day ahead brings Q2 construction work data at 11.30am EST. Earnings season rolls on with reports from Rio Tinto, Woolworths, Nine Entertainment, Virgin Australia, Invocare, Healius and Nanosonics. Wall Street has reports on crude oil inventories and new home sales slated for tonight.
