The ASX fell by more than 1% on opening, following the US which had its worst daily fall since April.
In America fears that the Federal Reserve would lift interest rates pushed the S&P 500 down 2% to 1,930.67 and the Dow Jones industrial average 1.88% to 317.06 points.
US traders are blaming Thursday’s big sell-off on the 0.7% jump in the employment cost index (ECI) in the second quarter. More on that here.
In Australia, the S&P/ASX 200 was down as low as 1.2% or 67.71 points to 5,565.2.
Westpac said there was no single reason for the fall overnight.
“There was no single and obvious catalyst; geopolitical factors, fear of Fed tightening, Portuguese banking sector concerns, Argentina’s default, and profit-taking all probably in the mix,” it said in its morning briefing.
Ric Spooner, chief market analyst at CMC Markets, says the severity of selling in world stock markets leaves investors wondering if this is the beginning of something major as markets begin to adjust for a world in which central banks begin to lift interest rates.
He says last night’s news that the US employment cost index rose 0.7% in the second quarter points to the possibility that the labour market is beginning to heal.
“Stock markets are starting to allow for the possibility that the Fed will begin to signal a tightening bias in its monetary policy,” he says.
However, Spooner says today won’t be all about the US.
Investors will also be watching China’s manufacturing PMI and the iron ore price.
“A steady outcome in these key indicators may mean that support for mining stocks will see the overall index fall less in Australia than it has in some other markets,” he says.
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