ASX set to drop as Wall Street slides again

THE Australian share market has dropped again at the open following another volatile session on Wall Street.

The benchmark S&P/ASX200 index was down 37.1 points, or 0.63 per cent, at 5,846.7 points at 1015 AEDT on Friday, extending losses made in the market’s worst week since January 2016.

The broader All Ordinaries was down 39.3 points, or 0.66 per cent, at 5,954.2, while the Australian dollar was buying 71.25 US cents from 70.70 on Thursday.

Thursday’s trade saw 2.7 per cent wiped off the benchmark ASX 200 to send it to a five-month low.

Overnight, Wall Street indexes tumbled for a second straight session their decline as volatility spiked and investors shunned risky investments, and Nasdaq looked like it could confirm a correction.

The Dow Jones Industrial Average fell 266.04 points, or 1.04 per cent, to 25,332.7, the S&P 500 lost 33.58 points, or 1.21 per cent, to 2,752.1 and the Nasdaq dropped 15.31 points, or 0.21 per cent, to 7,406.74.

WALL STREET SELLOFF DEEPENS

— AFP

US stocks dipped sharply in a volatile afternoon session on Thursday before paring losses in the final hour of trading amid President Donald Trump’s continued attacks on the central bank.

Some market watchers had predicted a bounce on Thursday after Wednesday’s pullback, Wall Street’s worst day since February.

Wall Street opened with modest gains after modest US inflation data. But it did not take long for volatility to return with a vengeance as major indices hit session lows in the final 90 minutes of the day.

Big losers in the Dow included JPMorgan Chase, Exxon Mobil, McDonald’s, Pfizer and Procter & Gamble. All fell at least 2 per cent.

“When we have a recalibration in values, it’s not surprising that it takes more than one day,” said Art Hogan, chief market strategist at B. Riley FBR. “In these kinds of moves, it usually takes three days to wash out.”

Most market viewers saw last week’s surge in the yield of the 10-year US Treasury bond as the catalyst for the two-day rout, an unexpectedly fast move higher than raised worries of runaway inflation and draconian Federal Reserve interest rate hikes.

Trump on Thursday doubled down on criticism of the Fed’s rate hike policies, saying the US central bank was “making a big mistake” and being “too aggressive,” in a talk show appearance on the Fox network.

Some commentators criticised Trump for stepping aggressively into the core decision-making of the Fed, whose independence to political pressure has been seen as crucial to its credibility and the credibility of US markets.

The upcoming third-quarter earnings season has been seen as a potential antidote to the unease. Earnings season begins in earnest on Friday with results from JPMorgan Chase and other large banks.

But Hogan said earnings were also a source of worry because they could showcase the consequences of Trump’s trade wars for US companies, from raising costs of products to forcing enterprises to change supply chains.

“The larger concerns we have are about what companies have to say about their concerns about the US and China,” Hogan said.

Global stocks in Europe and Asia fell sharply on Thursday, following the down trend in the United States.

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