Dire US economic data and bank earnings have set up Aussie shares for a triple-digit opening loss after Wall Street tumbled.
Australian index futures sank 122 points or 2.2 per cent as US stocks fell for the second time in three sessions.
Cracks appeared in Wall Street's three-week rebound after reports on retail sales and industrial production highlighted the scale of the economic damage from lockdowns to combat the spread of the Covid-19 virus. Bank stocks slumped as quarterly updates from Bank of America and Citigroup showed lenders were setting aside billions of dollars for an anticipated wave of loan defaults.
The S&P 500 sank 63 points or 2.2 per cent, denting a recovery that had lifted the benchmark index 27.5 per cent since its bear-market low on March 23. The Dow shed 445 points or 1.86 per cent and the Nasdaq 123 points or 1.44 per cent.
The tone was set early by reports showing industrial production and retail sales plunged more than economists expected last month. The 5.4 per cent slump in industrial production across America was the largest since 1946. A separate measure of manufacturing in the greater New York area this month showed activity dived 57 points to a record-low -78.2. Retail sales shrank 8.7 per cent in March, versus expectations for a decline of 7.1 per cent.
The financial sector slid 4.4 per cent after profit reports from Bank of America and Citigroup confirmed the darkening outlook signalled by Wells Fargo and JPMorgan Chase earlier in the week. Bank of America shed 6.5 per cent after setting aside $3.6 billion in reserves and reporting first-quarter profit well short of expectations. Citigroup gave up 5.6 per cent after its first-quarter profit almost halved. Goldman Sachs edged up 0.2 per cent as a strong result from the firm's trading division suggested it will navigate the economic storm better than most of its competitors.
A 0.5 per cent loss made health the best of the sectors. Insurer UnitedHealth was one of only five Dow components to buck the market downtrend, rising 4.1 per cent after reaffirming its profit outlook.
The energy sector crumbled 4.7 per cent after US crude settled at its lowest level in 18 years. West Texas Intermediate fell 24 cents or 1.2 per cent to US$19.87 a barrel as US stockpiles climbed for a 12th week. Brent crude, settled $1.91 or 6.6 per cent lower at US$27.69. The slump came despite a global deal last week to reduce output.
“Despite the efforts by global oil producers to curb production in order to balance the market over the last week, the world is still facing a massive demand issue,” Tyler Richey at Sevens Report Research told MarketWatch. “Until we see consumption of refined products begin to recover, resulting in increased refinery runs, it is very difficult to make a bullish case for oil prices in the near term.”
The materials sector sank 4.5 per cent as factory reports painted a bleak picture for demand for raw materials. BHP's US-listed stock shed 4.83 per cent and its UK-listed stock 4.91 per cent. Rio Tinto fell 4.11 per cent in the US and 1.16 per cent in the UK. The spot price for iron ore landed in China eased 25 cents or 0.3 per cent to US$85.85 a dry ton.
A flight to the perceived safety of the US dollar helped pulled end a four-session rally in gold. Gold for June delivery settled $28.70 or 1.6 per cent lower at US$1,740.20 an ounce as the US dollar index climbed almost 0.7 per cent. Gold is used by some investors as a hedge against a falling dollar. The greenback's sharp rise sent the Australian dollar down almost 2 per cent to 63.17 US cents.
The Australian share market started this holiday-shortened week on the advance, but yesterday dipped 21 points or 0.4 per cent to trim the S&P/ASX 200's gain for the week to 1.5 per cent. The bullish mood at the start of the day unravelled following the worst consumer confidence figures in the 47-history of the survey.
Sentiment may be tested once again today when the Australian Bureau of Statistics releases March employment data at 11.30 am EST. Economists predict the jobless rate jumped to 5.4 per cent from 5.1 per cent as the lockdown began to bite. Tonight is likely to bring more bleak data from the US, where reports are scheduled on unemployment claims, building permits and manufacturing.