A nasty sell-off awaits traders this morning in Australia and other markets after commodity prices fell to five and six year lows (yet again) on Friday and equities were battered from pillar to post.
US shares lost around 2.2% last week for the S&P 500, the Dow lost 2.9% and Nasdaq fell 2.4% (despite the surge in Amazon on Friday).
Eurozone shares were down 1.8%, Japanese shares lost 0.3% and Australian shares dropped 1.8% after five days of losses last week.
MSCI’s all-country equities world index fell 1% on Friday, while European shares lost 0.9%.
However, despite some soft economic data on Friday on manufacturing, Chinese shares continued to recover with a 2.9% gain, but lost ground on Friday in something of a surprise.
Bond yields fell partly in response to falling commodity prices reigniting deflation fears oil was back below $US50/barrel in New York and gold falling to a a series of five year lows.
Copper also lost ground, falling 4.6% over the week in New York and a touch more in London (depending on currencies). Gold fell more than $US50 an ounce as well.
The Aussie dollar, often used as a proxy for China trades, fell to a six-year low. The recent decline in a wide range of commodities, including oil, has weighed on currencies such as the Canadian, NZ and Australian dollars as well as the Norwegian krone.
As a result the Aussie dollar solid off, hitting a low of 72.68 and ended at 72.82 and looking to test the 70 US cent mark shortly if commodity prices continue their slide.
Iron ore prices were weak.
All this meant a big sell-off in share price futures on Friday night and Saturday morning and the ASX 200 is looking at a loss of close to 50 points at the opening later this morning.
That will follow the very weak week last week when the ASX 200 lost 1.8% and the All Ords 1.7%.
The ASX 200 ended at 5566.1 points on Friday, while the All Ordinaries ended on 5556.8 points.
The 2.2% slide in the S&P 500 was its biggest weekly decline since March, closing on 2,079.65 (and down 1% on the day).
A sell-off in energy and materials stocks, dragged many markets lower, as commodity prices turned lower. On Wall Street, healthcare-related shares fell, while tech stocks were still feeling the impact of the weak Apple quarterly report earlier in the week.
Amazon started up 18% in early trading, but eased to close up 10% on the day. That wasn’t enough to drag the Nasdaq higher and it lost 1.1% to end the week on 5,088.63.
The Dow Jones Industrial Average lost 0.9% on Friday to end at 17,568.53.
In China, Shanghai ended lower Friday, but managed a third-straight week of gains, despite a slide in manufacturing in July to 14 month lows.
The Shanghai Composite Index lost 1.3% at 4070.91, ending a six-day rally, but it still added 2.9% for the week.
It has bounced 16.1% from the lowest point of the recent sell-off on July 8. The smaller Shenzhen index also closed down 1.3% at 2322.71.
