* U.S. stock markets plunged in their biggest 1-day drop in more than 2 years. Happy birthday Mr. President!
* European stock markets plunged overnight for their biggest 1-day drop in over a year as well, due to growing fears about the eurozone sovereign debt contagion and the faltering global recovery.
* Asian markets ended sharply lower yesterday, on fears about the global economic outlook and a possible double-dip recession.
* Commodities prices traded sharply lower, but gold prices remained around record levels again closing above $US1,650. Crude-oil plunged -6% in the session.
The SPI Futures is trading below the key pivot support level of 4200, ending down -3.5% (or -150 points) at 4,092. The key levels for our index today are 3950 and 4100. Australian shares are set to open sharply lower today after the SPI plunged through its key level of 4200 overnight following on from the sharply negative leads from key markets in the U.S. and Europe, as investors rushed for the exits as concerns over faltering global growth and European debt contagion fears, sparked the spectre of a double-dip recession.
See below for ASX listed companies in the news today.
Economics News Today
* July Australian PCI
* Reserve Bank of Australia Quarterly Statement on Monetary Policy
U.S. Markets
U.S. stock markets plunged to their biggest 1-day drop in more than 2 years. Happy birthday Mr. President!
In a fear-driven market all three major indices closed down over -4.3% as they again sold-off relentlessly throughout the day, closing at 8-month lows. The Dow Jones Index closed down over 500 points, its biggest 1-day loss since December 2008, and is down 11% from its 2011 peak. In the broader markets the S&P 500 and the tech-heavy Nasdaq Composite sold -off heavily with the indices down 13% from their 2011 peak and erasing all of their gains for the year. No sectors were spared as the sector falls ranged form -3% to -7% down in the session.
Globally investors have succumbed to the pressures resulting for the U.S. debt ceiling fiasco, European sovereign debt contagion concerns which are becoming a reality, and the global austerity measures that will have to be implemented in order to get debt under control just when economic data worldwide is confirming the enconomic recovery is faltering.
In the U.S. consumer spending figures have disappointed while manufacturing activity is slowing and investors are now bracing for the non-farm payrolls employment report due out tonight.
Commodities prices fell, with gold and silver prices which were initially higher reversing by the end of the session as traders sold off the precious metals in order to meet margin calls. Crude-oil plunged -6% and has broken the up-trend that has been in place since January 2009.
All ten company groups that make up the S&P index traded lower: Industrials were down -5.4%, Materials were down -6.8%, the Energy sector was down -6.9%, Financials were down -5.1%, Technology was down -4.0%, while Consumer Staples were down -4.9%.
The Dow Jones closed down -4.3% (or -513 points) at 11,384, the S&P 500 index closed down -4.8% (or -60 points) at 1,200, the Nasdaq ended down -5.1% (or -137 points) at 2,556, and the smaller cap Russell 2000 was down -6.0%.
European Markets
European stock markets plunged overnight for their biggest 1-day drop in over a year, due to growing fears about the eurozone sovereign debt contagion and the faltering global recovery. The Stoxx Europe 600 index fell -3.4%, its biggest 1-day percentage drop since May 2010.
Across the region mining, energy and financial stocks all sold off heavily. The sell-off was sparked by comments from the European Central Bank (ECB) President Jean-Claude Trichet who admitted the risks in the region are growing, saying economic risks “may have intensified” and that recent economic data showed economic growth in Europe has decelerated.
Spain and Italy are the third and fourth largest eurozone economies, and have sovereign debt problems, but are too big to bailout. Yields on Spanish and Italian bonds have been climbing in recent weeks, fueling concerns that they could run into funding problems, and traders had been hoping that the ECB would step in and buy their bonds in the open market.
However the ECB President confirmed that at this time the ECB is only buying Portuguese and Irish government bonds. In London the FTSE 100 index slid to its lowest level in 11 months, with mining, energy and financial stocks all selilng off heavily, as Rio Tinto reported a 30% rise in first-half profit but cited headwinds of the strong Aussie dollar slowing global growth, while Lloyds Bank posted a first-half loss. In Germany the DAX 30 plunged yet again to levels not seen since October 2010, as the market has fallen 16% in the past 2 weeks.
In London the FTSE 100 index was down -3.4% (or -191 points) at 5,393, the German DAX was down -3.4% (or -225 points) at 6,415, while in France the CAC was down -3.9% (or -134 points) at 3,320.
Asian Markets
Asian markets ended sharply lower yesterday, on fears about the global economic outlook and a possible double-dip recession.
In Japan the Nikkei Stock Average actually edged higher as export stocks found some support as the yen slumped against major currencies after the Finance Ministry intervened to curb its recent rise. In China the Shanghai Composite index ended modestly higher, while in Hong Kong the market ended lower. There is key Chinese economic data due out next week so caution prevails.
Markets across the region are set to follow Europe and the U.S. in selling off today. Overnight copper prices slumped to their lowest close in five weeks, as bearish comments from the ECB President fuelled concerns over faltering economic growth in the eurozone region. Crude-oil plunged -6%, while gold and silver finished well off their highs.
In China the SSE Composite was up 0.2% (or 5 points) at 2,685, while in Hong Kong the Hang Seng Index was down -0.5% (or -108 points) at 21,885 and in Japan the Nikkei 225 Index was up 0.2% (or 22 points) at 9,637, South Korean KOSPI was down -2.3% for the session, while the Indian market was down -1.4%.
Commodities
The Dollar Index was higher at 75.26 on a lower Euro, while the Australian Dollar last traded lower at 104.51. Commodities prices were sharply lower.
For the session the benchmark crude NYMEX for August delivery was down -6.0% (or -$US5.50)settle at $86.43. Copper prices are still below 2-year highs as copper for August delivery was down -2.1% (or -8.9 cents) at $US4.2310. August gold was down -0.8% (or $US12.90) at $US1,650.50.
ASX News Today
ACL – Alchemia the drug devopler says that their generic blood-thinning drug has been launched in the United States by Alchemia’s marketing partner, Dr Reddy’s Laboratories.
CAZ – Cazaly Resources jumped after the junior iron ore explorer announced the sale of its Parker Range project in WA.
DUE – Duet Group expects to pay a distribution of 16 cents per security in 2011/12 as it suspends its distribution reinvestment plan while it goes to the market to raise $277 million in new capital.
ERA – Energy Resources Australia (ERA) has dramatically lowered the estimated reserves at its key Ranger uranium mine.
FML – Focus Minerals is set to assume majority control of Crescent Gold to create a mid-tier gold miner after major shareholder Deutsche Bank backed the deal.
GBG – Gindalbie Metals has signed a rail access agreement allowing it to transport iron ore from its multi-billion-dollar Karara project to the Geraldton Port in WA’s Mid West region.
LEI – Leighton Holdings the construction firm has been boosted by news it expects to post a smaller annual loss than expected.
LYC – Lynas Corp says a mine that will tap into the richest known deposit of rare earths in the world has been officially opened in WA’s's Goldfields region by Premier Colin Barnett.
NCM – Newcrest says 9 people, including two Australian residents, have died when a helicopter flying to a Newcrest mine in Indonesia crashed.
SDL – Sundance Resources says it is not opposed in principle against a takeover by China’s Hanlong Mining, but the price has to be right and conditions need to be dropped.
SPT – Spotless Group has confirmed media reports that it will retain its garment hanger business, Braiform, following unsolicited approaches from potential buyers.
TCL – Transurban Group the Toll road operator has increased its annual profit by nearly 90 per cent to $112.5 million, as revenue from tolls increased by 10 per cent.
WRT – Westfield Retail Trust says it will pay a half year distribution of 8.1 cents per stapled security for the six months ended June 30.
Local Corporate Reporting
Asciano Group (AIO) Full year 2011 Ex-dividend date
Northern Energy Corporation (NEC) Q4 2011 Activities Report
Perseus Mining (PRU) June Quarterly Report
Programmed Maintenance Services (PRG) Full year 2011 AGM
Ex-dividend Date
Ozgrowth Ltd (OZG)
Westoz Inv Ltd (WIC)
Market Summary
ASX – to open sharply lower
US & UK/Europe – sharply lower
US ADRs – Broadly Lower
BHP down -3.5% & RIO down -9.7%; AWC down -11%
ANZ down -8.6% & NAB down -7.7%
NEM down -4.7%, JHX down 4.3%, NWS down -6.7%
Commodities Stock Index down -6.9%
Gold Stocks Index down -5.7%
Oil Stocks Index down -6.8%
By Michael Hevern
Head of Research
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