THE ASX WEATHERS THE STORM FROM ANOTHER SHOCK US PLUNGE

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  • The ASX was the first major exchange to open after the US market officially entered a correction
  • Some commentators say it’s not just a technical sell-off but something deeper
  • Others say “buy the dip” with plenty of volatility ahead

The ASX was hit by another round of chaotic selling from the US where the stock market is now officially in a correction.

But by midday the Australian market had started to claw back some of the earlier losses, recording a smaller dip than Wall Street.

On Wall Street, the Dow closed down 4.15% to 23,860.46 and the tech-heavy Nasdaq was down 3.90%.

The S&P 500 dropped 3.75%, closing 10.4% below its record high on January 26, meeting the definition of a correction — a 10% decline from its most recent high.

In early trade, the Australian market was a sea of red. The slump also extended across Asia.

The ASX200 quickly dropped below 5800. At the start of the week it was well above the key 6000 mark.

Soon after opening, the index was down 1.7%.

But at the close, the losses had narrowed with the ASX200 at 5,838.00, down 52.70 points or 0.89%.

The ASX200 lost 4.6% over the week. The local market fell hard for two days, dropping 3.2% on Tuesday alone, before recovering slightly on Wednesday and Thursday.

On the ASX today, Rio Tinto had been down 2.6% but had closed at $76.86, down just 0.8%.

Westpac was down 0.1% to $30.35 but the NAB climbed back to just within positive territory to close at $28.91, up 0.04%.

Macquarie Group was down 2.4% to $100.53.

Shares in Myer fell has much as 10% after the department store issued a profit downgrade on weak sales. A the close, they were down 9.3% to $0.585.

Head of the Sydney-based hedge fund Bronte Capital John Hempton says: “I thought it ridiculous that the market could rise 30bps per day in January. I had no idea when it would stop. It stopped.

“It was expensive before the sell off.

“It remains expensive.”

James Whelan, investment manager at VFS Group, a wealth management company in Sydney says: “Finger on the pulse has a reading that this has moved from a healthy, required pullback to something maybe much worse.

“The last money in buying the dips is the first money out, hence the voracity of the selling. We’re calling them ‘weak-handed longs’ and if they’ve stepped aside we’ll need the adult money to help us out or it’s going to be a bad February.

“Shining lights are iron ore strength & a weakening AUD. We’re focussing on making sure portfolios are best able to gain from the inevitable post-correction rally, which means [foreign] banks and materials.”

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, says the current pullback has been triggered by worries around US inflation, the Fed and rising bond yields but made worse by an unwinding of bets that volatility would continue to fall.

“We may have seen the worst, but it’s too early to say for sure,” he says.

“However, our view remains that it’s just another correction.”

The Australian dollar fell to a six-week low against the US dollar, $US0.7782.

The index in early trade today:

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