ASX Set for a Turbulent Day of Trade

The Aussie markets are bracing for a volatile day of trade.

Last night the ASX 200 closed 2.1% lower, losing $32 billion of value. If global markets provide any indicators, today should be more of the same.

Overnight, the S&P500 shed 3%, closing on 1,914. The Down Jones and NASDAQ were both down 2.8% and 2.9% respectively.

European stocks didn’t fare any better. The Euro Stoxx index lost 2.5%, finishing on 3,189. Meanwhile, the Germany DAX lost 244 points, down 2.4% to 10,016.

In Britain, the FTSE 100 also shed 3%, closing on 6,059 points.

Yet again China’s economy was at the centre of the selloffs. This time, however, it Chinese manufacturing data sending markets in a tailspin. Factory activity contracted in August, trending below long-term averages.

But the Chinese aren’t alone in that respect. A JP Morgan reading of global factory activity dipped to two year lows. Manufacturing, it seems, is falling across the world. And it’s adding to fears the about the extent of the global economic slowdown.

GDP figures to weigh on ASX

Another cloud hanging over the ASX is the GDP figures out later today. Economists expect results showing the economy grew at 0.4% in second quarter. That’s well down on the 0.9% GDP growth from the first quarter. And it’d leave yearly economic growth at a paltry 2.2%.

What should you be looking out for today? You may want to keep an eye on resource stocks today. Aussie miners took a battering on international markets overnight.

BHP Billiton [ASX:BHP] was down 6.7% on the London Stock Exchange. Rio Tinto [ASX:RIO], meanwhile, fell 4.9% on the LSE too. The leading cause was the continuing falls in commodity prices. Brent oil fell 10.2%, to a six-year low of US$48.64. Iron ore prices were stable in daily trade, at just over US$56 a tonne. But expectations for future declines is weighing on resource stocks.

Aussie dollar hits six-year low

In other markets news, the Aussie dollar hit a six year low this morning. At 7:00am AEST, the Aussie was trading at $0.716 against the US dollar. That was down $0.92 from yesterday. The Aussie was also down against the euro, pound, and yen.

Its decline came despite the Reserve Bank’s decision to keep rates on hold at 2% yesterday.

As with global markets, the fears over slowing manufacturing drove the dollar down. BK Asset Management’s Boris Schlossberg explains:

All of this is pointing towards the idea that global manufacturing is slowing considerably. [That has] major impacts on the commodities that Australia produces’.

The RBA won’t mind a weaker dollar. What they will mind is that demand for Aussie commodities is slowing. What point is there in promoting cheaper exports if no one is buying? There is none. And that’s why GDP, the dollar and stocks are falling in equal measure. It’s a vicious cycle with no end in sight.

But the markets are cottoning onto this. It should prove another  wild day on the ASX.

Mat Spasic,

Contributor, Markets and Money

PS: Markets and Money’s Vern Gowdie believes the ASX is heading for much worse in the future. He says that you should prepare yourself for a catastrophic crash in stocks.

Vern is the award-winning Founder of the Gowdie Family Wealth advisory service. He’s ranked as one of Australia’s Top 50 financial planners. Vern’s convinced the ASX could lose as much as 90% of its $1.8 trillion market cap.

That’s why he’s written ‘Five Fatal Stocks You Must Sell Now’ for you.

In this free report, Vern identifies the five companies which could destroy your wealth. It’ll surprise you to learn which blue chip stocks made his blacklist. And he’s identified one major commodity stock that could catch you by surprise. To find out how to download the report, click here.

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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