Wall Street sinks to 14-month low, Nasdaq briefly enters bear market
The Nasdaq entered a bear market, as oil prices continue to plunge and US investors worry about a government shutdown. (Reuters: Brendan McDermid)
Wall Street has continued to drop further into correction territory, driven by fears of rising interest rates and a potential government shutdown.
Markets at 8:10am (AEDT):
- ASX SPI futures flat at 5,430, ASX 200 (Thursday’s close) -1.3pc at 5,506
- AUD: 71.15 US cents, 56.18 British pence, 62.1 Euro cents, 79.18 Japanese yen, $NZ1.05
- US: Dow Jones -2pc at 22,860, S&P 500 -1.6pc at 2,467, Nasdaq -1.6pc at 6,528
- Europe: FTSE 100 -0.8pc at 6,712, DAX -1.4pc at 10,611, CAC -1.8pc at 4,692, Euro Stoxx 50 -1.7pc at 3,001
- Commodities: Brent crude -4.4pc at $US54.71/barrel, spot gold +1.5pc at $US1,261.11/ounce
The local share market is expected to open lower, following the negative lead of foreign markets.
The Australian dollar rose slightly to 71.14 US cents at 8:10am (AEDT), on the back of a weaker greenback.
The Nasdaq Composite was the worst-performing US index. It fell into a bear market, before clawing back some losses in the final trading hour.
New York’s tech-heavy index has shed 19.5 per cent since its late-August peak.
Overnight, it tumbled 1.6 per cent to 6,528, driven by heavy losses across Apple, Amazon and Netflix shares.
Meanwhile, the industrial-skewed Dow Jones index has wiped out all its gains from the last 14 months — dropping 464 points, or 2 per cent, to 22,860.
In the last five trading days, the Dow has shed more than 1,500 points.
The benchmark S&P 500 also fell sharply, losing 1.6 per cent to 2,467.
Yesterday’s decision by the Federal Reserve to raise borrowing costs has continued to spook investors — particularly after the US central bank quashed hopes of stopping its interest rate hiking cycle next year.
“All people are talking about today is the aftermath of the Fed hike,” said Michael Antonelli, managing director at Robert W Baird.
“The Fed just killed the notion that they are here to backstop the market.”
Adding to the gloom were fears of a potential government shutdown, as American politicians scramble to negotiate a funding bill before the Friday midnight deadline.
US President Donald Trump said border security must be part of legislation to fund the US government.
He told fellow Republican leaders in Congress that he will not sign a Senate-passed bill because it fails to include enough funding for border security.
“I’ve made my position very clear. Any measure that funds the Government must include border security,” Mr Trump said at a White House event.
Mr Trump has demanded $US5 billion to put toward building a wall on the US border with Mexico that he argues is needed to keep out illegal immigrants and drugs — a massive project which Democrats have rejected as ineffective and wasteful.
Rise of the bears
Nearly $US7 trillion has been wiped off global stock markets this year, with emerging markets trampled flat by a charging dollar.
European markets echoed the pessimism from US markets, and closed at their lowest levels since late-2016.
London’s FTSE was down 0.8 per cent, while Frankfurt’s DAX index shed 1.4 per cent.
The Bank of England voted to keep the UK’s benchmark interest rate on hold at 0.75 per cent.
Britain’s central bank said that Brexit uncertainty had “intensified considerably” over the last month.
It also said falling oil prices were likely to push inflation below its 2 per cent target soon, helping to support the British economy.
In Asia, Japan’s Nikkei and South Korea’s KOSPI indices fell into bear markets, having dropped by 20 per cent since their recent highs — joining fellow bears Shanghai and Hong Kong.
Furthermore, oil prices plunged to their lowest level in 16 months.
The price of Brent crude fell 4.5 per cent to $US54.69 per barrel, on mounting concerns about a global oversupply and slowing global economic growth.
As investors embraced an increasingly risk-averse sentiment, the price of gold jumped 1.4 per cent to $US1,260.11 per ounce.