Index futures point to a triple-digit opening loss following heavy falls on Wall Street as tanking oil prices rattled investors.
ASX SPI200 futures slumped 109 points or 2.1 per cent to 5090, signalling further weakness after two days of declines that have knocked 266 points or 4.8 per cent off the S&P/ASX 200. The benchmark index looks likely to start today’s session at its lowest level in more than two weeks.
US stocks tumbled for a second day as a collapse in oil markets underlined the grim economic outlook with much of the world in lockdown to slow the spread of Covid-19. The S&P 500 fell 87 points or 3.07 per cent. The Dow dropped 634 points or 2.67 per cent, extending its two-day loss beyond 1,200 points. The Nasdaq shed 298 points or 3.48 per cent.
Buying appetite was cruelled by another night of extreme turmoil in oil markets. A day after the price of American oil turned negative for the first time in history, the carnage moved on to contracts further out. As West Texas Intermediate for May delivery recovered $47.64 or 126.6 per cent to expire at US$10.01 a barrel, WTI for delivery the following month crumpled US$8.86 or 43.4 per cent to US11.57.
Importantly for Australian investors, the international benchmark, Brent crude, dived $6.24 or 24.4 per cent to US$19.33, its biggest one-day fall since 1991 and weakest close since 2002. The decline in the international benchmark confirmed the reasons for this week’s sell-off run much deeper than US storage issues.
“Oil is a residual issue of the broader global ‘stay at home’ and this situation will not change until Western nations and US states begin opening up,” Tom Lee, head of research at Fundstrat Global Advisors in the US, told CNBC. “And they cannot open up until each jurisdiction feels they have a handle on the healthcare crisis.”
Losses in the US energy sector were cushioned by a tweet from President Donald Trump saying he had instructed White House officials to formulate a plan to save the industry. While the sector fell for the seventh time in eight sessions, its 1.7 per cent loss was among the mildest as all 11 sectors dropped between 1.6 and 4.1 per cent. Chevron gave up 2.3 per cent and Exxon Mobil 0.5 per cent.
Tech stocks led declines after bellwether IBM reported a 3.4 per cent drop in revenue in the first quarter as the virus began to impact demand. IBM shed 3 per cent, Intel 4.8 per cent, Microsoft 4.1 per cent and Cisco Systems 4.7 per cent. Facebook fell 4.2 per cent and Google parent company Alphabet 3.9 per cent following analyst downgrades related to speculation about softening online advertising.
Other events impacting trade included reports that North Korean leader Kim Jong Un was ill after heart surgery, and news that Congress had approved an additional US$450 billion in funding to small US businesses.
Resource stocks faced heavy selling as the collapse in oil infected other commodity markets. BHP’s US-listed stock sank 5 per cent and its UK-listed stock 6.44 per cent. Rio Tinto shed 3.81 per cent in the US and 5.19 per cent in the UK. The spot price for iron ore landed in China declined $2.60 or 3 per cent to US$83.60 a dry ton.
Industrial metals turned lower as traders took profits from a recent rebound. Benchmark copper on the London Metal Exchange sagged 3.1 per cent to US$5,000.50 a tonne. Aluminium dropped 0.9 per cent, nickel 2.6 per cent, lead 1.6 per cent, zinc 1.7 per cent and tin 2.9 per cent.
A flight to the security of the US dollar helped push gold to its weakest level in almost two weeks. Gold for June delivery settled $23.40 or 1.4 per cent lower at US$1,687.80 an ounce.
The dollar sagged 0.9 per cent to 62.8 US cents after Reserve Bank Governor Philip Lowe warned the economy faced the biggest contraction since the Great Depression of the 1930s.
The S&P/ASX 200 shed 132 points or almost 2.5 per cent yesterday. The local market faced additional pressure from selling by superannuation funds on the first day members were allowed to withdraw retirement savings to cover living expenses.
Investors will get another insight into the impact of the Covid-19 pandemic when the Australian Bureau of Statistics releases retail sales data at 11.30 am EST. US economic data is light again tonight. Quarterly earnings reports are due from AT&T, Kimberly-Clark, Xerox and Delta Air.