The bloodletting certainly isn’t over yet – the bears are set to savage the ASX again today, with futures down 2.5% or 194 points as of 9:15 am this morning.
Sharp falls in US markets were a driving force but a report by Reuters reveals that a sharp drop in carry trade positions – where investors have borrowed money from economies with low interest rates such as Japan or Switzerland, to fund investments in higher-yielding assets elsewhere – were a strong contributing factor.
With the Japanese yen rallying more than 11%, those traders have been caught flat-footed.
"In our assessment a lot of this (market sell-off) has been down to position capitulation as a number of macro funds have been caught the wrong way around on a trade, and stops have been triggered, initially starting with FX and the Japanese yen," Mark Dowding, chief investment officer at BlueBay Asset Management told Reuters, referring to pre-determined levels that trigger buying or selling.
"We don't see evidence in data that's saying we're looking at a hard landing," he added.
US and European markets
The US markets looked very similar to the ASX overnight – red across the board.
The CBOE Volatility index (VIX), considered one of the better metrics for measuring fear sentiment among traders, rose 64.9%, its biggest jump since 1990.
Berkshire Hathaway (NYSE:BRKa) cut its position in Apple (NASDAQ:AAPL), lopping 4.8% off the Tech company’s share price.
Other major tech stocks followed – Nvidia and Intel (NASDAQ:INTC) fell 6.4%. Microsoft (NASDAQ:MSFT) lost 2.2% and Alphabet (NASDAQ:GOOGL) 4.5%.
Overall, the Dow shed 1,034 points or 2.6%, the S&P500 3% and the Nasdaq 576 points or 3.4%. It was the biggest single-day loss for both the Dow and the S&P500 since September 2022.
Europe didn’t fare any better.
All sectors were falling – utilities and oil and gas dropped more than 3%. The FTSE300 slipped 2.1% to its lowest level in half a year, while the UK-based FTSE100 hit its lowest point since April 2022 after dropping 2%, its worst day in more than 12 months.
Currencies and commodities
Oil fell to a seven-month low as the global market sell-off continued.
Brent fell US 51 cents (0.7%) to US$76.30 per barrel and US Nymex crude US 58 cents (0.8%) to US$72.94 per barrel.
Base metals followed suit. Copper futures fell 2.4% to a four-and-a-half-month low and aluminium futures 0.9%.
Gold slipped by US$25.40 (1%) to US$2,444.40 per ounce and spot gold was trading near US$2,410 per ounce by the US market close.
Iron ore was the standout performance in terms of commodities, rising by 8 cents (0.2%) to US$104.18 per tonne on stronger economic predictions from China.
On the small cap front
The Small Ordinaries followed the ASX200 down yesterday, shedding 4.48% or 135.4 points.
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