A nasty selloff awaits ASX investors today after global markets slumped on Friday, driven by fears about Covid, the impact of the improved outlook for the US economy ahead of this week’s Fed meeting and weak commodity prices.
As well investors had to contend with the sluggish Chinese economy and the slow death of Chinese property giant, Evergrande and its $US304 billion debt pile.
But the most immediate cause was what market traders called ’the four witches’ – the expiring of options and futures contracts.
Eurozone shares fell 0.8% on Friday and the US S&P 500 lost 0.9% and reflecting the weak global lead ASX 200 futures fell 68 points, or 0.9%, meaning a very weak start for the local market this morning.
That was after the major Wall Street indexes ended last week with slight losses. The S&P 500 was down 0.6% for the week, closing Friday’s session at 4,432.99. The Dow lost 0.1% for the week to end at 34,585.88 and the Nasdaq dropped nearly 0.5% for the week to 15,043.97.
The 10-year US Treasury bond yield was rose over the week, ending at 1.37%.The Aussie dollar fell back under 73 US cents.
On top of this, the slide in iron ore prices continued Friday with the price of 62% Fe fines from the Pilbara losing more than 5% on the day to be down at $US101.95.
That was a fall of more than 22% for the week. As we pointed out in the weekend email, our big miners are now staring down the barrel of sharp falls in revenue and earnings for the current half, and Australia’s trade surplus will take an almighty hit over the next four months.
Evergrande’s woes and the outcome of the Fed meeting on Thursday morning, Sydney time, will keep markets focused on the negative.
After Friday’s steep fall, Eurozone shares lost 0.9% and Chinese shares fell 3.1% with concerns about the Evergrande Group also weighing.
Hong Kong shares fell more than 5% because of Evergrande’s problems and the looming crackdown and shake-up in casinos in Macau where the mainland government is grabbing control.
Japanese shares managed a 0.4% gain.
Australian shares fell with solid gains in energy and property shares offset by sharp falls in mining stocks on the back of the plunge in iron ore prices.
Bond yields rose as did oil prices rose, but metal and iron ore prices fell.
The ASX200 finished down 0.76% on Friday at 7,403.7 for the week, pushing the index down a small 2.9 points for the week overall.
Fortescue led the declines on Friday, losing 11.5% for the session while Rio Tinto finished the day 4.7% lower and BHP lost 3.4%.
For the week BHP shares were down 5%, Rio shares lost 7%, Fortescue shares shed a huge 16% and shares in the big Brazilian shipper, Vale lost 9.3%.
