The Australian stockmarket will plunge more than 2% after a big sell off overnight in futures and major markets in Europe and the US. The S&P 500, the key global market indicator fell under 1900 points for the first time in more than a month.
Wall Street is heading for its worst quarterly performance in five years with losses of between 6% and 8% so far, while our market is down 7% and will go much lower today.
The overnight ASX 200 futures trading has a fall of more than 100 points lined up for the start of trading – at one stage the fall was slated to be around 120 points as Wall Street sold off.
The looming fall means that the bullish 71 point jump yesterday was nothing more than a relief rally and totally at odds with market sentiment offshore in Europe and the US.
Falls in the prices of copper, gold and oil won’t help sentiment, while the Aussie dollar is back under 70 US cents again this morning.
Again the falls will be led by major miners such as BHP Billiton and Rio Tinto, which weakened overnight as shares in Glencore, the mining and commodities group, tanked in London, dropping 29% to new record lows – after a 21% slide over all of last week.
In the US the once booming pharmaceutical sector was hammered hard as more politicians called on companies to justify high prices for some of their drugs.
The sector has seen some of the biggest mergers this year and has been probably the most active sector for investor interest, but no more as shareholders face massive losses as prices plunge.
Biotechs, drug companies and pricing are emerging as surprise early issues in the 2016 US election campaign ands this means more volatility for investors.
The ostensible trigger for the sell off overnight was news of a slide in Chinese industrial company profits last month.
It’s a minor piece of data, but it tapped into continuing fears about the health of the Chinese economy, commodity prices and global economic growth with the IMF about to downgrade (yet again) its 2015 and 2016 GDP growth figures.
The S&P 500 fell 49 points, or almost 2.5%, to 1,882; the Dow slumped 294 points, or about 1.8%, to 16,022 and at one stake was off more than 300 points.
And the Nasdaq Composite plunged 148 points, or 3.2%, to 4,538, thanks to the continuing sell off in biotechs.
The iShares Nasdaq Biotechnology ETF (Exchange Traded Fund) which is a popular measure of the biotech sector’s performance, sank 7.3% overnight.
Slumping commodities prices, including falls in the prices of copper, oil and gold, didn’t help sentiment and those fears about the stability of Glencore worried London investors.
In fact European markets were down 2% or more in most cases overnight.
Shell’s costly Arctic oil drilling campaign was abandoned overnight at a probable cost of $US7 billion or more.
And the mildly bullish news of Alcoa breaking itself into two companies failed to have any impact outside its shares which rose more than 5%.
In Australia, yesterday’s 71 point jump is irrelevant and will be reversed. It was driven mostly by a solid day for the big banks. BHP rose, Rio eased a touch – and both face big falls today.
