US, European and Asian stockmarkets have fallen sharply on rising concerns of a Greek sovereign default, and additional worries over China’s financial health.
The news saw markets in Asia down by 2% to 4% in gloomy trading yesterday that continued into Europe and the US.
European markets were off 1% to more than 2% in early trading last night.
US markets lost 2% to 3%, despite a better than expected survey of manufacturing for September which showed a strong expansion, as well as a sharp jump in car sales last month.
In fact US markets closed at their lowest levels on a year.
India’s survey showed activity stalling, but Japan’s Tankan survey of business survey rose.
US markets were spooked by fears that AMR, the parent company of American Airlines could go bankrupt, a rumor that saw trading halted several times.
In Europe the French and Belgian governments are discussing a new bailout for Dexia bank because of rising problem loans to greece, Italy and other countries. Dexia was bailed out in 2008.
Bank shares in Europe and the US fell sharply.
Chinese markets are on holiday all this week, so the pressure from the China bears is being felt in Hong Kong.
The Hang Seng index was down 4.4% to 16,736.97, extending its 2.3% drop Friday, while the Hang Seng China Enterprises Index — which tracks Hong Kong-listed mainland Chinese firms — slumped 5.7% thanks in part to the closure of the mainland markets this week for the National Day holidays.
Other Asian markets fared only a little better, with Japan’s Nikkei Stock Average losing 1.9%, and Australia’s ASX 200 lost 2.7%. South Korean markets were also closed for holiday.
The ASX/200 plunged 111.6 points to 3897, while the All Ordinaries index lost 109.4 points, or 2.7%, to 3960.7.
The fall wiped another $32 billion off the value of the Australian market, extending September’s near 7% fall to close to 10% and the fall in value to nearly $120 billion.
The Australian dollar fell further, losing more ground to fall as low as 95.92 US cents, a 10-month low.
That was after it fell 9% in September and 13% from its low in late July.
It last traded at 96.20 US cents in Australia, but tipped back under 96 US cents in US trading.
New York oil futures fell 2% to $US77.61 in another slump that tells us investors fear a looming recession.
Copper, another commodity that is supposed to be a bit of a indicator for economic activity, fell another 4.4 US cents on Comex to end at $US3.1075 a pound.
But Comex gold futures rose 2.2% to $US1657.70 in New York.
Gold rose around 8% in the September quarter, despite losing 11% in the month of September.
Much of the selling in Chinese shares is in and around finance and property groups with rising fears about losses and possible defaults among developers.
Hong Kong led the slump, with the main Hang Seng Index plunging under the 17,000 level within minutes of the open, an area not visited since mid-2009.
The sell-off followed those reports that Greece’s Finance Ministry had approved a new budget for parliamentary review that falls short of austerity targets (See next story).
Brokers in Hong Kong say China could soon see a sharp rise in debt defaults, with worries about a wave of bad debts, especially in property, recently highlighted by Credit Suisse, among others.
Some Chinese property firms nose dived on rising concerns about the health of that sector.
Marketwatch reported that on a note CLSA Asia-Pacific Markets analyst Christopher Wood cited a Financial Times report that Chinese officials appeared ready to let many real-estate developers there fail in an economic “survival of the fittest.”
“Given the currently extremely nervous nature of investor sentiment globally, such an attitude in Beijing increases the probability of a real hard-landing scare in China, which will likely be followed at some point by a dramatic policy U-turn in Beijing,” said Wood.
CLSA reduced the weighting for Chinese shares to a neutral rating, “given the likelihood that credit concerns at the Chinese banks will continue to surge,” Wood said.
And Macau casino shares were pounded for a second day on these new fears about the Chinese economy and bad debts.
Shares of the territory’s largest casino by revenue, SJM Holdings lost 20%, those of Sands China, fell 14.3%, while Melco International Development Ltd (part-owned by James Packer’s Crown), slumped by more than 14%, as did Wynn Macau Ltd.
We all know the third quarter and especially September were rotten times for investors.
The MSCI All Country World Index slumped 18% for the quarter, with a drop of 2.3% on Friday.
It lost roughly $US5.3 trillion in market capitalization in the quarter, according to Thomson Reuters.
But strange as it might seem, the Australian stockmarket wasn’t the basket case some commentators and media writers led us to believe.
Last week the Australian market, along with many others round the world, steadied and either finished higher or with small losses, especially compared with earlier in September and in August.
For example the Australian market was up 2.7% last week, but the US market was up around 1.3%. Europe was also higher as well.
But Friday saw a nasty sell-off in Europe and the US.
And over the September quarter our market did well, relative to offshore markets, especially those in Europe and especially many commodities such as gold, copper and silver.
For September the ASX 200 lost 6.8% – a nasty sixth monthly decline in a row, but for&
