The Australian share market is set to tumble for its second day in a row over rising fears that the US-China trade war could push the world economy into recession.
Market snapshot at 7:45am (AEST):
- ASX SPI futures -1.8pc at 6,493, ASX 200 (Wednesday’s close) -1.5pc at 6,640
- AUD: 67.05 US cents, 54.5 British pence, 61.16 euro cents, 71.84 Japanese yen, $NZ1.07
- US: Dow Jones -1.9pc at 26,079, S&P 500 -1.8pc at 2,888, Nasdaq -1.6pc at 7,785
- Europe: FTSE 100 -3.2pc at 7,122, DAX -2.8pc at 11,925, CAC -3.1pc at 5,423, Euro Stoxx 50 -3c at 3,413
- Commodities: Brent crude -2.3pc at $US57.56/barrel, spot gold +1.5pc at $US1,499.24/ounce, iron ore flat at $US93.38/tonne
By 7:05am (AEST), ASX futures were down by a sharp 115 points, or 1.7 per cent.
The Australian dollar, meanwhile, is buying 67.03 US cents.
It appears the ASX 200 index is headed for a 3 per cent slump in just two days, when yesterday’s losses (-1.5pc) are factored in.
Steeper losses overseas
On Wall Street, the Dow Jones index shed 494 points, or 1.9 per cent, to close at 26,079.
In the past couple of days, the Dow has plummeted by more than 800 points, wiping out all its gains from the September quarter.
The benchmark S&P 500 and tech-heavy Nasdaq indices lost 1.8 and 1.6 per cent respectively.
For the first time in about a month, the Dow and S&P have slipped below their 100-day moving averages.
Many investors believe that falling below such moving averages means the indices are likely to fall further.
However, European markets were hit even harder, with London’s FTSE plunging 3.2 per cent and Germany’s DAX down 2.8 per cent.
«The weakening conditions in Europe and the slowdown in China it’s all adding up to the same thing — essentially, worries that the global economy is slowing and giving investors reason to pause and take profits,» said Robert Pavlik, chief investment strategist manager at SlateStone Wealth.
US economy begins to falter
A set of weak private sector job figures in the US triggered the global panic selling.
Payrolls growth in August was weaker than expected — the initial number of new jobs being created (195,000) was sharply revised down to 157,000, according to the ADP National Employment Report.
In addition, 135,000 new jobs were created in September, which fell below market expectations of 140,0000.
ADP said that «businesses have turned more cautious in their hiring,» with small enterprises becoming «especially hesitant».
That added to fears sparked on Tuesday, when the US recorded its worst manufacturing result in more than 10 years.
The recent set of weak data has shaken investors’ faith in the US economy, which had shown relative strength despite slowing economic growth around the world.
«If China buys less from us [the United States], we have less to manufacture, fewer orders to fill,» said Sam Stovall, chief investment strategist at CFRA Research.
«This data is indicating we are not immune to this trade dispute, that it’s hurting us as well as China.»
US widens trade dispute with Europe
Adding to trade concerns, the United States has won approval from the World Trade Organisation (WTO) to levy import tariffs on $US7.5 billion ($11.2 billion) worth of European goods.
Market analysts fear this could trigger a tit-for-tat trade war between the US and European Union.
The US was involved in a 15-year dispute, alleging that the EU provided illegal subsidies to Airbus — to give it an unfair competitive advantage over US airline Boeing.
WTO arbitrators said Boeing had lost the equivalent to $US7.5 billion a year in sales and disruption to its aircraft deliveries because of cheap European government loans to Airbus.
Airbus shares fell 2 per cent following the WTO’s decision to side with the US.
The United States said, from October 18, it would enact 10 per cent tariffs on European-made Airbus planes and 25 per cent duties on French wine, Scotch and Irish whiskies and cheese from across the continent.
Meanwhile, spot gold jumped 1.4 per cent to $1,499.31 an ounce as investors shifted away from the risk of stock markets and towards safe-haven assets.
Weak economic data continued to weigh on oil prices, with Brent crude falling 2.4 per cent to $US57.48 a barrel.