need2know: Positive start in store after crazy night on Wall Street

The Dow’s 500-point swoon would mark the third time since mid-August the 30-stock gauge has tumbled that much on a closing basis. Photo: Richard DrewLocal shares are poised for a positive start after a roller-coaster night on Wall Street.


What you need2know

SPI futures up 38pts or 0.6pc to 4840

AUD at US69.00¢, 80.85 Japanese yen, 63.52 Euro cents and 48.80 British pence.

On Wall St, in late trade, S&P 500 -0.5%, Dow -1%, Nasdaq +0.5%

In Europe, Stoxx 50 -3.3%, FTSE -3.5%, CAC -3.5%, DAX -2.8%

In London, BHP -7.4%, Rio -4.8%

Spot gold +1.4% to $US1103.11 at 2.53pm New York time

Brent crude -3% to $US27.90 at 2.28pm New York time

US oil -6.5% to $US26.61 at 2.28pm New York time

Iron ore last traded down 2.73% at $US41.61 a tonne.

What’s on today

Australia consumer inflation expectations January, HIA new home sales November. Euro inflation for December, Euro consumer confidence January. France manufacturing confidence January. US Philadelphia Fed manufacturing January. Earnings: Verizon, Amex, Starbucks, United Continental, Schlumberger.

Stocks in focus

Investec recommends investors sell shares of Glencore, Anglo, Antofagasta and Ferrexpo. The analysts have buy ratings on Rio Tinto and Centamin. “Market conditions represent the perfect storm for commodities given that demand is falling, supply is rising, inventory levels remain stubbornly high and the US dollar stubbornly strong,” Investec wrote.

A measure of volatility over 10 days on BHP’s London stock jumped to the highest since September 10 on Wednesday. The stock tumbled 7.4 per cent in London trading to its lowest in 11 years, extending its decline this year to 24 per cent amid mounting speculation it will cut its dividend next month. BHP’s drop this year has outpaced declines by Glencore and Rio Tinto Group in London.


The yen strengthened 0.9 per cent to 116.58 per dollar, and touched 115.98, the strongest level since Jan. 16, 2015. Japan’s currency appreciated 0.9 percent to 127.19 per euro. The euro was little changed at $1.0897.

Russia’s currency weakened as much as 3.1 per cent to a record 81.0490 against the US dollar. The Mexican peso fell to a record 18.4775 per US dollar and is down 6.4 per cent this year, making it Latin America’s worst performing major currency.

Saudi Arabian banks are under orders to stop selling currency products that allow investors to make cheap bets on a devaluation of the riyal, according to five people with knowledge of the matter.


The Bloomberg World Mining Index dropped as much as 3.3 per cent to its lowest since September 2003, with the world’s biggest miner, BHP Billiton, losing 7.4 per cent in London.

Citigroup cut copper and other base-metals forecasts. Benchmark three-month copper on the London Metal Exchange closed down 1.1 per cent at $US4360 a tonne, having hit its highest since January 8 on Tuesday. However, prices remain near their weakest since May 2009 at $US4318, marked on Friday. Nickel fell, so did zinc, lead and aluminium.

The world’s biggest miners have little to offer to shareholders, Investec said. They are selling assets and ending dividend payments to generate cash, analysts wrote in a report on Wednesday. Earnings are now a “scarce commodity” for the industry, they wrote.

United States

US stocks fell, with the Standard & Poor’s 500 Index reaching at 21-month low, following a renewed selloff across stocks worldwide as scepticism about the strength of the global economy intensified.

Equities staged a late-day rally paced by health-care and small-cap shares that briefly erased a drop of 3.7 per cent in the Nasdaq Composite Index. The Dow Jones Industrial Average and S&P 500 cut their worst losses by more than half. Energy companies sank further into five-year lows, on pace for their worst monthly slump since 2008 as oil plunged. Chevron slid 3.1 per cent. International Business Machines fell 4.9 per cent after its earnings forecast missed projections.

The Standard & Poor’s 500 Index fell 1.2 per cent to 1859.43 at 4pm in New York, closing at its lowest level since April 2014. The gauge trimmed a slide of more than 3.6 per cent.

“We were oversold and we didn’t keep falling off the table,” said Walter “Bucky” Hellwig, who helps manage $US17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama.. “The last-hour strength is positive and I think it’s due to the fact that investors are saying, ‘This thing is oversold, I’m going to put some money to work,’ and it’s worked out better than buying it on the up days and then watching it disappear.”


European stocks slid to a 15-month low as falling oil prices and results from companies including Zurich Insurance Group and Royal Dutch Shell exacerbated investor concern about global growth. The Stoxx 600 erased Tuesday’s rebound, tumbling 3.2 per cent to 322.29 at the close of trading. The VStoxx Index measuring volatility expectations for euro-area shares jumped 14 per cent.

“I’m sitting on my cash, not buying right now, because we think it can get worse..” said Michael Woischneck, an equities fund manager who oversees the equivalent of $US156 million at Lampe Asset Management in Dusseldorf, Germany. “We see a worst case of another 10 per cent down.”

Deutsche Bank, Germany’s largest bank, said it expects to post a loss for the fourth quarter after taking additional litigation charges of about €1.2 billion. Full-year revenue will be about €33.5 billion, with the net loss estimated at €6.7 billion for the year, Deutsche Bank said in a statement late Wednesday. The results include previously disclosed impairments taken in the third quarter, full-year litigation provisions of about €5.2 billion and restructuring and severance charges of €1 billion, the lender said.

Barclays chief Jes Staley has started a fresh round of cuts at the investment bank, affecting staff in New York, London and most deeply in Asia, according to a person with knowledge of the matter.

What happened yesterday

Australian shares closed at fresh 2½-year lows on Wednesday after worries about Chinese growth and global commodity markets continued to weigh on investor sentiment, while investors dumped ANZ and BHP.  The S&P/ASX 200 index fell 62 points, or  1.2 per cent, to 4841.5, while the All Ordinaries 58 dropped points to 4896.9.