ASX hits fresh eight-month low
The Australian sharemarket hit a fresh eight-month low after the International Monetary Fund downgraded its global growth forecasts, compounding mounting jitters from the end of US Federal Reserve stimulus this month.
Following the 1.5 per cent drop in the US S&P 500 index last night the S&P/ASX 200 index fell 1.3 per cent at the opening, before rallying to a 0.8 per cent loss and sliding again to close down 51.6 points, or 0.98 per cent, at 5241.3.
Domestic sentiment was buoyed by a 1.5 per cent bounce in Dalian iron ore futures, but stocks slipped again as the iron ore futures halved early gains.
The IMF lowered their 2014 forecast to 3.3 per cent, down 0.1 per cent from July's forecast, and 2015 forecast to 3.6 per cent, 0.2 per cent lower.
Global growth jitters were stoked last night by a 4 per cent plunge in German industrial production, the biggest drop since February 2009.
"Markets looked to be searching for reasons to take back risk off the table as they factor in the reality of some global growth slowdown and still present geo-political risks," National Australia Bank economist David de Garis said.
The Australian dollar rose US0.6¢ to an overnight high of US88.20¢, before reversing to US87.70¢, while government 10-year yields dropped 4.2 points to 3.349 per cent.
Last night global benchmark US 10-year yields dropped 10 points to 3.34 per cent, but were already down before the IMF news.
Westpac strategist Graeme Jarvis said in a client note that the fall in US yields occurred with little news flow and despite the fact on Friday was the release of the "universally acclaimed to be strong payrolls report".
"All I can do is go back to the narrative," he said.
"QE3 has an end date that is fast approaching."
At the end of the two previous Fed quantitative easing programs global stocks fell between 15 and 20 per cent.
The Shanghai composite resumed trading after a week long holiday and was up 0.3 per cent at the close of the ASX despite the Chinese services PMI index easing to 53.5 points to 54.1.
In Tokyo the Nikkei index fell 1.3 per cent as the yen rallied against the US dollar.
Copper fell 1.1 per cent to $US6630 a tonne, steel rebar futures fell one per cent and gold rose 0.6 per cent to $US1212 an ounce.
More to come…
