Australian index futures pointed to a 92-point opening loss after a surge in coronavirus infections sent US stocks sharply lower.
The ASX SPI200 slumped almost 1.6 per cent amid fears a second round of government lockdowns in the US will torpedo the global economic recovery.
US stocks crumbled overnight after the steady drip of bad news about COVID-19 built to a roar. The S&P 500 tumbled 81 points or 2.59 per cent as the nation recorded its second-biggest daily increase in infections since the pandemic took hold. The Dow gave up 710 points or 2.72 per cent. The Nasdaq’s eight-session winning run came to a shuddering halt with a loss of 222 points or 2.19 per cent.
Fears of a second shutdown were sharpened by news New York, New Jersey and Connecticut will impose new quarantine rules on visitors from “hotspot” states. Several city and state officials were reported to be reconsidering reopening plans after the seven-day average of new cases in the US increased more than 30 per cent from the previous week. California, Oklahoma and Florida announced record rises in infections. Hospitalisations in Texas increased more than 7 per cent in a day, prompting the governor to warn of a “massive outbreak” across the state.
“All the hopes of investors looking for a better economy to improve the bottom lines of companies shut down in the recession have been dashed,” Chris Rupkey, chief financial economist at MUFG in the US, told CNBC. “Forget about the fears of the virus coming back in the fall – the number of new cases and hospitalisations in states like Arizona, Texas, and Florida says the threat is happening right now.”
Companies that would benefit most from a return to normal economic life suffered hardest. The S&P 1500 airlines index skidded 7.6 per cent. Cruise lines Carnival, Norwegian and Royal Caribbean shed at least 11.1 per cent. The Dow Jones Transportation Average dropped 3.1 per cent. Disney gave up 3.9 per cent after staff at its Florida theme park petitioned against reopening.
Also weighing on sentiment were a downbeat economic outlook from the International Monetary Fund and reports the Trump administration was considering new trade tariffs. The IMF slashed its global growth prediction for this year to -4.9 per cent, a cut of almost two percentage points from three months ago. Meanwhile, Bloomberg said the White House was considering tariffs on US$3.1 billion worth of goods from European countries. The president has also threatened to impose tariffs on Canadian aluminium.
The S&P/ASX 200 has ground higher for four sessions, but the rally has been so weak that today’s opening decline will likely send the benchmark index to its lowest level since January 16. The index lost its hold on the 6000 level on January 11 and closed yesterday at 5966 after several failed attempts over the last few sessions.
Mining giants BHP and Rio Tinto helped keep the index above water yesterday, but look like drags today following declines in the US and UK. BHP’s US-listed stock slipped 2.83 per cent and its UK-listed stock 3.04 per cent. Rio Tinto lost 2.27 per cent in the US and 2.3 per cent in the UK. The spot price for iron ore landed in China improved $2.10 or 2 per cent to US$104.60 a dry ton.
Oil slid more than 5 per cent as a third straight weekly increase in US crude inventories added to concerns about the global economic outlook. Brent crude settled $2.32 or 5.4 per cent weaker at US$40.31 a barrel.
Buying interest in industrial metals was undermined by the IMF’s grim outlook. Benchmark copper on the London Metal Exchange fell 0.6 per cent to US$5,856.50 a tonne. Aluminium lost 1.2 per cent, nickel 1.4 per cent, zinc 0.2 per cent and tin 1.7 per cent. Lead gained 0.9 per cent.
A strengthening US dollar dulled interest in gold. August gold settled $6.90 or 0.4 per cent lower at US$1,775.10 an ounce. The surging greenback pushed the Aussie back below 69 US cents. The dollar was last down 0.83 per cent at 68.72 US cents.