LA Private

Reality strikes Wall Street

Reality struck Wall Street on Friday from various directions, setting up a nasty opening for the ASX this morning. Friday night’s share price futures platform had the ASX 200 staring at a 50-point loss when trading resumes this morning.

That was after the ASX 200 Index dropped 25.5 points, or 0.3%, to 7788.1 at the close on Friday. However, it wasn’t enough to wipe out the small rises earlier in the week, and the index ended with a gain of 0.19%, which won’t last today.

A flight to safe havens saw conflicting moves in the markets. Iranian attacks on Israel at the weekend will only add to the safe-haven momentum on Monday until the impact is known.

US bond yields rose, then eased in late afternoon dealings as the safe-haven effect overcame earlier worries about inflation. That saw the US dollar rise, forcing other currencies like the Aussie lower.

Normally, that should have been negative for gold and oil, but they both enjoyed a solid day, though oil’s gains lasted longer than gold’s. “We’re getting further risk-off sentiment heading into the weekend. You’re seeing there’s a flight to safety trade, with the dollar stronger, and we’re seeing equities sell-off,” Rob Haworth, U.S. Bank Wealth Management senior investment strategist told CNBC.

“That comes on the heels of the inflation data that tells us the economy’s still pretty hot and inflation is sticky; that’s what led [investors] to really adjust their expectations around the Fed. … That’s some of why they’re getting cautious headed into the weekend,” said Haworth.

Weak bank earnings and forecasts didn’t help either and that saw a wide decline in major bank shares in the wake of the quarterlies from JPMorgan Chase, Wells Fargo, and Citi, which failed to provide any confidence.

JP Morgan shares slumped 6.5% in a major sell-off. Not helping was the continuing worries or the realization that inflation in other countries is easing faster than in the US.

But it was the rising tensions in the Middle East that crowned what was a volatile day of trading – especially with fears of more fighting over the weekend. The Dow dropped 475.84 points, or 1.24%, closing at 37,983.24. The S&P 500 slumped 1.46% at 5,123.41 while the Nasdaq pulled back by 1.62% at 16,175.09.

At one point in the trading session, the Dow was down by nearly 582 points, or 1.51%. The S&P 500 slid as much as 1.75%.

Over the week, the S&P 500 dropped 1.56%, the Dow fell 2.37% while the tech-heavy Nasdaq eased 0.45% in the belief that good results from tech giants will save the day.

They might, but they won’t calm nerves in the Middle East. Nor will they produce rate cuts from the Fed before it sees the need for reductions. The return of deflation and weak March trade data saw Chinese shares lose 2.6% over the week – Hong Kong’s Hang Seng shed more than 2% on Friday alone.

But Japanese shares rose 1.4%. Bond yields rose in the US, UK, and Australia but fell in Europe. While oil prices dipped, then rose, gold rose then dipped, copper rose, as did iron ore prices.

The $A fell as the $US rose.