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Markets Live: Growth fears to rattle ASX for second day

Global growth concerns and a surprise build in US inventories saw crude oil prices tumble to a one-month low on Wednesday.

“Weak economic data and rising inventories weighed on sentiment in the commodity sector,” ANZ senior commodities strategist Daniel Hynes said in a note. “US crude stockpiles rose by 3.1 million barrels last week, according to the US Energy Information Administration. This was significantly higher than the market had been expecting.”

Front-month Brent crude prices – the global benchmark – slumped by 2 per cent to $US57.69 per barrel, extending the unwind from the recent high of $US71.95 per barrel in mid-September to 19.8 per cent. Earlier in the session prices fell to as low as $US57.22 per barrel, leaving crude in a technical bear market.

The benchmark price now sits at the lowest level since September 9. The general rule of thumb is that movements in crude prices generally take around two weeks to flow through to what Australians pay at the petrol bowser, excluding the impact of discounting cycles that vary across the country.

Coles has taken the wraps off its first-ever restaurant-supermarket hybrid in a move designed to give the $20 billion retailer a leg up on rival Woolworths in the grocery convenience wars.

At a test store in Tooronga, Victoria, the retailer is trialling new ready-made food offerings through partnerships with local favourite EARL Canteen and national sushi chain Sushi Sushi.

Both companies will run department-store style concessions within the supermarket using their own staff and products, which include barista-made coffee and sushi rolls containing Coles’ ‘special burger sauce’.

Coles chief executive Steven Cain dubbed the Tooronga store as Australia’s first ‘grocerant’, a hybrid food hall concept pioneered by international grocers, such as Canada’s Loblaws.

“The market is going two ways. One is towards value…and the other is towards convenience. And that’s what this store caters for,” Mr Cain said.

Coles’ shares closed at $15.24 on Wednesday.

You can read more here.

In his first speech as Prime Minister at the Conservative Party conference, Boris Johnson struck a conciliatory tone, outlining a compromise with Brussels in a last-ditch bid to “get Brexit done”.

Addressing 6000 members gathered in the northern English city of Manchester, Johnson proposed an all-island regulatory zone for the island of Ireland covering all goods and agrifood.

This would prevent a physical border of customs checks on the island, something viewed as critical to preserving peace between the Republic and the north while at the same time freeing Britain from adhering to EU regulations after Brexit.

Under the plan, the Northern Ireland assembly and executive would be required to give their consent to this arrangement and every four years afterwards, before the end of a transition period after Brexit in December 2020.

Northern Ireland would stay part of the UK’s customs territory but to avoid customs checks, a declaration system would be introduced with a simplified process for small traders, along with a trusted-traders scheme.

There’s more here.

Hiring across the US private sector slowed sharply in September, adding to concerns about the outlook for the US economy.

Private sector payrolls grew by 135,000 from a month earlier, according to the ADP National Employment report, coming in slightly below the 140,000 level expected by financial markets. Compounding the small miss in September, payrolls growth in August was revised down sharply by the ADP, coming in at 157,000 compared to an initial estimate of 195,000.

“The job market has shown signs of a slowdown,” Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said following the release of the September update

“The average monthly job growth for the past three months is 145,000, down from 214,000 for the same time period last year.”

Mark Zandi, chief economist of Moody’s Analytics, said the details of the September report suggests that “businesses have turned more cautious in their hiring”.

“Small businesses have become especially hesitant. If businesses pull back any further, unemployment will begin to rise,” he said.

Following a fall in the US ISM manufacturing PMI to a decade-low in September, including news that manufacturers were reducing employee headcount during the month, the slowdown in hiring in the ADP report has done little to appease growing investor concerns about the outlook for the US economy.

IG MARKETS SPONSORED POST

ASX futures closed down 120 points, or 1.8 per cent, at 6493.

  • AUD flat at 67.06 US cents
  • On Wall St: Dow -1.9% S&P 500 -1.8% Nasdaq -1.6%
  • In New York: BHP -2.7% Rio -3.2% Atlassian -1.2%
  • In Europe: Stoxx 50 -3% FTSE -3.2% CAC -3.1% DAX -2.8%
  • Nikkei 225 futures -1.9%
  • Spot gold +1.5% to $US1501.83 an ounce at 1.22pm New York time
  • Brent crude -2.1% to $US57.63 a barrel
  • US oil -1.9% to $US52.60 a barrel
  • Iron ore flat at $US93.38 a tonne
  • Chinese markets are closed for national holidays
  • LME aluminium -2% to $US1706 a tonne
  • LME copper -0.1% to $US5678 a tonne
  • 2-year yield: US 1.48% Australia n/a
  • 5-year yield: US 1.43% Australia n/a
  • 10-year yield: US 1.60% Australia 0.96% Germany -0.55%
  • 10-year US/Australia yield gap near 7am AEST: 64 basis points

IG MARKETS SPONSORED POST

Stock markets plunged last night on growing concern that the global economy could be heading for a severe economic slowdown. The volatility generated by Wednesday’s disappointing US ISM manufacturing PMI data was compounded by a miss in key US labour market data.

There is a burgeoning “snow-ball” effect as it relates to market sentiment right now. There’s a sense that fear is feeding on fear. On Wednesday it was a rather small miss in the US ADP National Employment report that fanned the flames of fear. With investors clearly hypersensitive, the miss introduced the idea that softening business conditions may be spilling over into the labour market.

That makes a handful of data releases in the US in coming days increasingly important. The first will be the release of US ISM Non-Manufacturing PMI data tonight that will be watched closely to see whether weakness in manufacturing is spilling over into the US services sector.

Of greater significance will be the release of US Non-Farm Payrolls data on Friday night. The labour market, and somewhat by extension, the American consumer, has remained the shining light for the US economy. If the jobs markets, and with it the outlook for consumption, starts to show signs of turning, the panic in the market will only grow.

Welcome to today’s Markets Live blog.

Global equities fell heavily for a second session on Wednesday, undermined by growing concerns towards the outlook for the US economy. Trade tensions also flared again, this time between the United States and European Union, doing little to help investor mood.

The ASX looks set to fall heavily on the open.

Your editor today is David Scutt.

This blog is not intended as investment advice.

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