* US stock markets plunged on open overnight and did not recover, as debt concerns filtered through to the US, as Washington’s deficit-cutting Super Committee made little progress, triggering the selloff.
* European stock markets dropped sharply overnight, due to growing concerns that the problems in Italy and Spain could lead to problems for the credit rating for the French economy. The Stoxx Europe 600 index fell -3.2%.
* Asian stock markets continued their slide. Investors continued to head for the exits as the debt issues in the eurozone and the US remain in focus. Traders are expected to remain negative again today.
* Commodities prices traded sharply lower, as gold prices were lower to $US1,674 and crude-oil closed down around $US97.
The SPI Futures is trading around the key pivot level of 4250, ending down -1.6% (or -65 points) at 4,121. The key levels for our index today are 4080 to 4180.
Yesterday Australian stocks drifted lower on yet another day of light trading. Investors chose caution due to the problems over the debt financing of the PIIGS economies in the eurozone. There were losses in stock markets across the Asian region, not helped by comments from Chinese Vice Premier Wang Qishan, who warned that a lasting global recession is on the cards.
In Canberra the federal government’s proposed mining tax cleared an important hurdle, with the key independent MPs agreeing to support the legislation in return for stronger oversight of coal seam gas projects and a higher threshold when the tax takes effect. Independent MP Andrew Wilkie said he would support the 30 percent tax, in return for lifting the starting threshold from a profit of $50 million to $75 million.
Superannuation funds have provided investors with some good news, reporting an increase in October after five consecutive months of negative returns. According to research company SuperRatings, balanced super funds gained 2.8% last month.
Shares in the All Ordinaries (XAO) generally eased again yesterday, closing down -0.3% at 4234. The S&P/ASX 200 (XJO) also closed down -0.3% at 4163.
Aussie traders are expected to sell off stocks again today, following the negative leads from the US and European markets. Traders fears over the eurozone debt crisis continue to weigh on sentiment, as Italian and Spanish debt funding costs remain at unsustainable levels, and in the US the super committee charged with reducing the US deficit hit a deadlock. We continue to have a busy week for AGMs and production reports, see below for details.
US Markets
US stock markets plunged on open overnight and did not recover, as debt concerns filtered through to the US. Washington’s deficit-cutting Super Committee made little progress, triggering the sell-off.
The Dow Jones Index broke support finishing at levels not seen since early October as all 30 component stocks finished in the red. In the broader markets the S&P500 and the tech-heavy Nasdaq finished around -2% lower. The financials and industrials sectors slumped over -2.3%, while the materials, energy, and technology sectors all traded down over -1.8%.
The US Super Committee, responsible for reducing the budget deficit by at least $US1.2 trillion over the next 10 years or risk triggering an automatic spending cuts, is deadlocked. This news triggered the selloff as traders worried about a possible credit rating cut being the fallout of the failed negotiations.
Commodities continued their selloff, with gold slumping to $US1,674 per ounce.
All ten company groups that make up the S&P index traded lower with Materials down -1.4%, Energy down -1.4%, Financials down -2.1%, Technology down -1.4%, Industrials down -2.0%, and Consumer Staples down -1.3%.
The Dow Jones closed down -2.1% (or -249 points) at 11,547, the S&P 500 index closed down -1.9% (or -18 points) at 1,197, the Nasdaq ended down -1.9% (or -49 points) at 2,523, and the smaller cap Russell 2000 was down -2.1%.
European Markets
European stock markets dropped sharply overnight, due to growing concerns over the problems in Italy and Spain could lead to problems with the credit rating for the French economy. The Stoxx Europe 600 index fell -3.2%.
The Moody’s Investors Service warned that rising French government borrowing costs and the faltering economic outlook could threaten the country’s AAA rating outlook.
Across the region the banks plunged on the growing fear over a possible financial system collapse in the eurozone. Resource stocks also sold off heavily. In London the FTSE 100 fell -2.5% as the resource stocks such as Xstrata PLC and Anglo American PLC dropped over -5%. The Spanish market also fell despite the overwhelming victory for the opposition popular and fiscally conservative Party of Mariano Rajoy in the weekend’s general election. Spanish borrowing costs remain around their highest levels since the start of the European sovereign-debt crisis.
In London the FTSE 100 index closed down -2.6% (or -140 points) at 5,222, the German DAX was down -3.4% (or -194 points) at 5,606 while in France the CAC was down -3.4% (or -102 points) at 2,895. Spain was down -3.5% and Italy was down -4.7%.
Asian Markets
Asian stock markets continued their slide. Investors continued to head for the exits, as the debt issues in the eurozone and the US remain in focus.
Across the region the financials led the falls as economic growth forecasts were ratcheted down again. In Japan data showed that the country swung back to a trade deficit in October, missing forecasts that had tipped a surplus. Resource stocks also sold off after Chinese Vice Premier Wang Qishan suggested the that global economy would certainly fall into recession.
In China the SSE Composite closed down -0.1% (or -1 point) at 2,415, while in Hong Kong the Hang Seng Index was down -1.4% (or -265 points) at 18,226 and in Japan the Nikkei 225 Index closed down -0.3% (or -27 points) at 8,348. The South Korean KOSPI was down -1.0% for the session, while the Indian market was down -2.6%.
Commodities
The Dollar Index was higher at 78.24 on a lower Euro, while the Australian Dollar last traded lower at 98.67. Commodities prices traded sharply lower.
For the session the benchmark crude NYMEX for December delivery was down -0.2% (or -$US0.22) to settle at $US97.45. Copper prices are seeking a support level as Copper for December delivery was down -3.0% (or -10.3 cents) at $US3.3160. December gold was down -2.7% (or -$US46.40) at $US1,674.
ASX News Today
BIS – Bisalloy Steel Group the steel plate supplier expects earnings in the current financial year to rise up to 50 per cent.
BOW – Bow Energy tells shareholders that the year has been challenging but there have been achievements.
IIN - Internet service provider iinet has confirmed its intention to buy Canberra-based TransACT for $60 million.
OST – Onesteel the steelmaker expects conditions for the Australian steel industry to remain challenging. These comments come after reports from Chinese steelmakers that they are also cutting steel production.
QAN – Negotiations between Qantas and two unions representing ground crew and long-haul pilots have collapsed, leaving the sides to face binding arbitration before Fair Work Australia the industrial relations arbitrator.
SEK – Online jobs website and education services provider Seek says it expects to post earnings growth in 2011/12.
MMX – Desperate times for Murchison Metals as it continues talks to sell its stakes in the beleaguered Oakajee port project and its sole producing mine in WA.
ORI – The ramifications over spill/discharge notifications continue over the Newcastle chemical leak.
Local Corporate Reporting
Ex-dividend Date
Market Summary
Commodities Stock Index down -1.6%
Gold Stocks Index down -1.4%
Oil Stocks Index down -1.6%
US ADRs – Broadly Lower
BHP down -2.8% & RIO down -5.1%; AWC down -3.9%
ANZ down -3.3% & NAB down -4.3%
NEM down -0.2%, JHX lower -1.6%, NWS down -1.4%
By Michael Hevern
Head of Research
