ASX seen lower as Wall St drops

Australian futures are pointing at a lower open as Wall Street continues to whipsaw investors. ASX futures were down 60 points at about 7.20am AEDT. The Australian dollar slid 0.9 per cent. The yield on the US 10-year yield dropped 7 basis points to 2.78 per cent.

"Today is another loud reminder that,in sharp contrast to last year, sig two-way price volatility is back, and not just for #stocks," tweeted Allianz chief economic adviser Mohamed El-Erian.

Shares on Wall Street turned lower in early afternoon trade and selling accelerated shortly after 2.30pm as investors sold tech shares. The pace of selling eased in the final minutes though the damage was done.

After surging more than 7 per cent the previous session to lead the Dow sharply higher, Microsoft reversed 4.6 per cent to lead the benchmark lower.

Selling accelerated on the Dow in afternoon trading. Bloomberg

Cisco, Apple and Intel also were lower by at least 2.4 per cent. Netflix shed more than 6 per cent, Facebook near 5 per cent, and Twitter slumped more than 12 per cent. Atlassian was caught in the tech downdraft too, sliding 4.6 per cent.

"Growth was the thing to buy," Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas, told Bloomberg. "Now the markets are starting to see some chips in the armour. The market is questioning the steadiness of the technology sector, although we still think it's going to be just fine."

Most pronounced was the selloff in the FANG block of tech shares and its megacap brethren. The NYSE FANG+ index plunged 5.6 per cent.

Facebook, under growing criticism that the social media company has failed to protect user privacy, extended its worst quarterly decline since 2012 as chief executive officer Mark Zuckerberg is expected to testify before the US House Energy and Commerce Committee.

About 70 per cent of institutional investors are "somewhat concerned" that a 20 per cent correction in the US stock market could come within the next two years, according to Bloomberg.

The Dow's steady rise has been halted. Bloomberg

Almost 60 per cent of those polled say the S&P 500 Index will underperform its 20-year annual average return in 2018, and half say the current market cycle is approaching its end, according to a survey released by money manager Commonfund. The survey was conducted in mid-March and included 200 institutional investors from endowments, foundations and public pensions.

Survey participants indicated that trade wars and protectionism were the greatest threat to the global economy, followed by rising interest rates. Emerging markets appear to be the most lucrative asset class, half of the respondents said, ahead of private equity, venture capital and natural resources.

Consumer confidence also appears to have been dented. The Conference Board's consumer confidence index is lower this month, after reaching an 18-year high in February.

Lynn Franco, director of economic indicators at the board said consumers' short-term expectations declined, including their outlook for the stock market, though overall expectations remain quite favourable.

A positive note for local investors: Rio Tinto said it agreed to sell its 80 per cent stake in Queensland's Kestrel underground coal mine for $US2.25 billion to a group including EMR Capital and PT Adaro Energy. The miner's US listed shares slid 1.6 per cent.

Today's Agenda

Local data: New Zealand ANZ business confidence March

Overseas data: German GfK consumer confidence April, US fourth quarter GDP, Pending home sales February

Market Highlights

SPI futures down 60 points or 1% to 5758 at about 7.20am AEDT

AUD -0.9% to 76.75 US cents

On Wall St Dow -1.4%, S&P 500 -1.7%, Nasdaq -2.9%

In New York, BHP -1.6% Rio -1.5%

In Europe: Stoxx 50 +1.2%, FTSE +1.6%, CAC +1%, DAX +1.6%

Spot gold -0.6% to $US1345.29 an ounce

Brent crude -0.7% to $US69.62 a barrel

US oil -1.2% to $US64.79 a barrel

Iron ore +1.3% to $US65.17 a tonne

Dalian iron ore -1.8% to 436 yuan

LME aluminium -0.4% to $US2044.50 a tonne

LME copper +0.7% to $US6649 a tonne

10-year bond yield: US 2.78%, Germany 0.50%, Australia 2.65%

Spot dollar index: +0.4% to 89.347

From Today's Financial Review

Top 10pc to lose $2793 a year under Labor: Labor's revised plan to deny refunds for excess franking credits will result in almost 86 per cent of the losses being confined to the nation's wealthiest 10 per cent.

Calling time on the 70/30 diversified portfolio: Both bonds and stocks have lost money in the US so far this year, and those banking on bonds as a way to protect their portfolio should be paying attention.

Chanticleer: Telstra faces its Amazon moment: The trio of companies that control 90 per cent of the mobile phone market – Telstra, Optus and Vodafone – are facing the telco version of Amazon as David Teoh's TPG prepares to enter the $20 billion a year mobile market.

United States

Trade angst weighed on leading tech companies with the Nasdaq 100 Index erasing most of Monday's gain after a report the Trump administration is considering a crackdown on Chinese investments in technologies the US considers sensitive.

"What it really amounts to is a complete lack of knowing what to expect," said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York. "It seems so open-ended, there is a lot of risk here and investors don't like uncertainty and this is the definition of uncertainty."

Facebook shares dropped 4.9 per cent to $US152.22 and are down nearly 15 per cent for the month. The Nasdaq Internet index saw its worst daily percentage drop since June 2016.

Of the 11 major sectors of the S&P 500 only defensive plays such as consumer staples, telecom, real estate and utilities ended the session in positive territory.

The Dow Jones Industrial Average fell 344.89 points, or 1.43 per cent, to 23,857.71, the S&P 500 lost 45.93 points, or 1.73 per cent, to 2612.62 and the Nasdaq Composite dropped 211.74 points, or 2.93 per cent, to 7008.81.

Since hitting a record on January 26, equities have been battered by worries about rising inflation, the pace of interest rate hikes by the US Federal Reserve and the possibility of a global trade war. The S&P 500 is down 9.1 per cent from its high.

The Chicago Board Options Exchange Volatility Index - Wall Street's fear gauge - spiked near 7 per cent to 22.50.

Twitter fell after short-seller Citron Research said it was short on the stock, adding that the company was "most vulnerable" to privacy regulations.

The US National Transportation Safety Board is opening a field investigation of a fatal Tesla Model X crash and major vehicle fire near Mountain View, California, last week, the agency said in a statement. It was unclear if the car was being driven by its automated control system at the time of the accident, which killed the Tesla driver and involved two other cars, the NTSB said in a Twitter post.

GE jumps on bets Buffett may invest: General Electric jumped the most in two years amid speculation that Warren Buffett will buy a stake in the beleaguered manufacturer.

Europe

European shares surged on Tuesday on incipient signs of a detente in trade rhetoric between Washington and Beijing, while French supermarket Casino was boosted by a grocery delivery partnership with Amazon.

The STOXX 600 index gained 1.2 per cent with all sectors rising, scoring its best day in six weeks, while Germany's DAX led with a 1.6 per cent rise.

European markets took their cue from a robust rebound on Wall Street that ran into its second day on Tuesday after reports the United States and China were negotiating to avert a trade war.

It marked a sharp bounceback from the previous days, in a sign that volatility was returning to stock markets.

"The volatility that we're seeing in markets reflects those who were initially fearful of the headlines, and those that see opportunities within that," said Chris Dyer, director of global equity at Eaton Vance.

Dyer remains overweight European stocks and underweight the US.

"What we see in Europe is valuations are lower, whereas the opportunity for margin expansion is more significant," he said, adding there is a "fair dispersion" between European and U.S. valuations.

He said he had added to some industrials stocks that had suffered due to the fear of trade wars.

Asia

China stocks snapped a four-session losing streak to end higher on Tuesday, powered by robust gains in tech firms, and as trade war fears eased on reports of behind-the-scenes talks between the United States and China.

At the close, the Shanghai Composite index was up 1 per cent at 3166.65, while the blue-chip CSI300 index was up 0.86 per cent at 3913.27. The rally was led by tech firms, with the tech-heavy start-up board ChiNextP closing up 3.6 per cent.

In Tokyo, the Nikkei ended 2.7 per cent higher at 21,317.32.

Tech stocks outperformed, with semiconductor equipment makers Tokyo Electron soaring 2.9 per cent and Advantest Corp surging 2.6 per cent, respectively.

Construction equipment maker Komatsu soared 5.1 per cent, Panasonic surged 5.0 per cent and Toyota Motor Corp gained 3.8 per cent.

The broader Topix advanced 2.7 per cent to 1717.13.

Currencies

Brett Gillespie, who heads global macro investments at Ellerston Capital, said the Australian dollar and the yuan could fall 2 per cent to 5 per cent against the US dollar in the next two to three months as higher tariffs may slow export growth and reduce demand for commodities. He added a wager against the Australian dollar last week, and also started betting against the offshore yuan earlier this month on the belief China may allow its currency to drop as much as 2 per cent.

Gillespie spent more than 11 years at the hedge fund firm founded by Paul Tudor Jones before joining Sydney-based Ellerston in 2016 to start a global macro strategy. Ellerston manages about $5 billion, according to its website, and has $130 million in its global macro fund.

China's currency yesterday touched its highest level in almost three years amid signs that a trade war may be averted, before erasing gains as the greenback rebounded.

The yuan surged as much as 0.6 per cent to 6.2418 per US dollar on Tuesday to its strongest level since a devaluation in August 2015. The currency closed down 0.1 per cent, while the offshore rate dropped 0.35 per cent at 6.35pm in Hong Kong.

The currency is gaining in part as the People' Bank of China hasn't signaled it will slow appreciation at any particular level, which may mean the yuan will test 6.2 per dollar soon, said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore.

The yuan is heading for a fifth straight quarter of gains, its best winning streak in four years.

Overall demand at a $US35 billion US five-year Treasury note auction on Tuesday increased to its strongest level in six months, resulting in a yield of 2.612 per cent on the latest five-year issue, Treasury data showed.

The ratio of bids to the amount of five-year notes offered was 2.50, which was the highest level since the five-year auction last September.

Commodities

Saudi Arabia and Russia are working on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years to come.

Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering a longer deal to extend a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices.

"We are working to shift from a year-to-year agreement to a 10-20 year agreement," the crown prince told Reuters in an interview in New York late on Monday. "We have agreement on the big picture, but not yet on the detail."

Copper prices rose on Tuesday after reports of behind-the-scenes talks between the United States and China fuelled hopes that a trade war could be averted and sparked a global stock market recovery, but a strengthening dollar limited gains.

Benchmark copper on the London Metal Exchange closed up 0.7 per cent at $US6649 a tonne, after touching a 3-1/2-month low on Monday.

"Copper is trying to react to the improved sentiment in the stock market (and) reduced fears about global trade tensions," said Saxo Bank analyst Ole Hansen.

But he said prices were unlikely to rally far. "With inventories on the rise, the market lukewarm about the near-term prospects for Chinese demand and the speculative community having sliced their longs to the lowest in a couple of years, there's not much of an appetite (for copper) right now."

Stockpiles in LME-registered warehouses at 383,975 tonnes are up 91 per cent this year and the largest since December 2013.

Bets on higher prices have fallen, with funds' net long position in copper on the Comex exchange down more than 80 per cent since the start of the year and the lowest since late 2016.

Copper rebounded from technical support at $US6500, a key psychological level and copper's December low, and was struggling to break above its 200-day moving average at $US6687.