ASX closes deep in the red
The Australian sharemarket reversed from the top of its trading range as bullish global equity market sentiment faded ahead of the US earnings season and concerns mounted over the sharp slowdown in Europe.
Following the 0.7 per cent drop on the US S&P 500 index last night the S&P/ASX 200 index fell 58.4 points, or 1.06 per cent, to 5452.5 as investors booked profits on stocks trading on stretched valuations.
European markets have been on the back-foot since last week, but three doses of weak German data, news US authorities planned to two sue two German banks and mounting pressure ahead of European Central Bank stress tests sparked average losses of 1.5 per cent last night.
The Australian dollar was little changed at US94� but government 10-year bonds fell 3.8 points to 3.535 per cent following the 6 point slump in US 10-years to 2.53 per cent.
"There were no shock news items, economic events or central bank speak that caused the moves," Westpac strategist Graeme Jarvis said.
The move was consistently lower was traders focused on "more concrete" fundamentals that suggested "something more substantial" may be developing in bond, equity and credit markets he said.
The Shanghai composite index was off 0.6 per cent at the ASX after a slip in consumer inflation to 2.2 per cent and a slight improvement in producer inflation to minus 1.2 that suggested the country remained in the grip of deflationary forces.
In Tokyo the Nikkei index slipped 0.2 per cent.
After fining French bank BNP Paribas $US9 billion for breaching US sanctions on Iran and other rogue states US prosecutors signalled they have turned their sights on Germany's Commerzbank, the country's second biggest bank, and the fear is Deutsche Bank could face a hefty settlement fine too.
The region's banks also face ECB financial stress tests around October, forcing many to clean up their balance sheets and take write-downs on badly performing loan portfolios.
Dalian iron ore futures dropped 0.6 per cent, offsetting a similar increase in the spot price to $US96.50¢ a tonne yesterday. Copper rose 0.2 per cent to $US7120 a tonne and gold rose $US7 to $US1323 an ounce.
More to come…
