– Market price action overnight has been dominated by the impact of the crash – apparent shooting down – of Malaysia Airlines flight MH17 over the disputed eastern region of Ukraine.
– This along with the launching of the Israeli ground offence in Gaza and the lockdown of the White House over a suspicious package (since found to be a false alarm) weighed on US markets into the close.
– Before launching into a recap of overnight trade it is worth making a couple of points about markets at times like these. First, the market reaction overnight is entirely natural and it is important for investors and traders not to overreact or panic out of their positions. Equally important however, and somewhat in contrast to the first point, is that at a time of extended low volatility we have seen this is exactly the type of “black swan” or Caribbean butterfly that could cause bigger market ructions – particularly given the face-off in Ukraine between the west and Russia.
– So traders will be alert, some alarmed and risk money will be, has been, taken off the table.
– Turning to overnight trade, at the close the Dow is down 0.94% or 161 points to 16,977, the S&P 500 lost 1.19% or 24 points to 1,958 and the Nasdaq lost 1.42% to 4,363.
– European stocks tanked once the news hit but were already in the red for the day and at the close the FTSE was 0.69% lower at 6,738, the DAX lost 1.07% to 9,754 and the CAC in Paris was 1.21% lower at 4,316. Milan and Madrid stocks fell 2.22% and 1.18% respectively.
– Locally, the impact has been that the SPI 200 September contract fell 27 points to 5,454 this morning and it is unlikely to be a good day given the risk-off event overnight and the big fall in iron ore down $1.44 tonne.
– Bonds were big movers overnight, highlighting the risk-off nature of this move with with US 10-year Treasuries rallying 7 points to 2.46% for a new 2014 low. Bonds in Europe and on the SFE here in Australia have also rallied with the 3s up 6 points and the 10s up 8 points.
– On Currency markets, the Aussie is sitting at 0.9347 at the moment holding in relatively well all things considered. Euro is largely unchanged at 1.3526 and Sterling is at 1.7097. But it was the Currency market safe haven – the yen – which had the biggest move with USDJPY down to 101.17 this morning.
– On Commodity markets, traders have leapt into gold and oil on the back of last night’s news. Gold rallied $17 to $1,316. Nymex July Crude is up $2.43 to $103.63 after looking like it was going to break back below the $100 mark earlier in the week. Copper closed at $3.21 lb, Corn was 0.33% and Wheat ripped 2.37% higher while Soybeans were down 1.05%.
– On Australia’s bulk commodity markets, as noted above, September 62% Fe Iron Ore swaps fell $1.44 tonne to $96.88. Newcastle Coal however, had its first up day in weeks, rising 60 cents tonne to $67.90.
Data is light today and the market will be focused on breaking news and in particular tensions between Ukraine and Russia, which is the key point about whether this is a one or two day wonder or really a black swan type event.
House prices are to be released on China, EU current account is out and tonight the US University of Michigan consumer confidence data is out.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Carbon tax repeal day was not a happy one for AGL shareholders. The stock fell 5.5% when it quantified the loss of earnings next year as a consequence of removing the carbon scheme at around $186m. This consisted of $100m in transitional payments for the Loy Yang power station and an estimated $86m from its renewable energy and gas portfolios due to lower wholesale prices.
However, AGL also pointed out that the repeal of the tax would have a material positive impact on the long term value of Loy Yang.
Those who see this sell off as creating a bit of value might be interested in the approach of potential chart support between about $14.70 and $14.85.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC