Finance Finance News ASX drops as Italy concerns cause Wall Street plunge

ASX drops as Italy concerns cause Wall Street plunge

Wall street
Worries about political turmoil in Italy and a decline in bank stocks have driven the markets down. Photo: Getty
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Australian stocks  opened 45 points, or .07 per cent lower at 10.30 (AEDT) after volatility returned to Wall Street overnight.

Worries over Italy put the S&P and Dow Jones Industrial Average on track for the biggest one-day drop in a month.

Political crisis in Italy triggered a rush to safe-haven assets as the prospects of a repeat election in the eurozone’s third-largest economy raised doubts about the country’s future in the economic bloc.

The Dow Jones Industrial Average fell 391.64 points, or 1.58 percent, to 24,361.45, the S&P 500 lost 31.47 points, or 1.16 percent, to 2,689.86 and the Nasdaq Composite dropped 37.26 points, or 0.5 percent, to 7,396.59.

Some major bank stocks sank as much as 5. per cent after JP Morgan corporate and investment bank chief Daniel Pinto suggested second-quarter markets revenue would be flat on the year.

If the losses sustain to the closing bell, those would be the biggest daily falls since April 24 and the first of more than 1 per cent drop in May.

“Notwithstanding what the banks themselves are saying, I’m actually a bit sceptical about loan volume growth in a high rate environment,” managing director and chief market strategist at Cantor Fitzgerald in New York, Peter Cecchini said.

“And you see the yield curve flattening, the two 2-10 spread to closest to the flattest to the year, and that’s bad for the profitability of the banks.”

The Dow on Tuesday dived below its 50-day moving average, a key technical level that represents short-term momentum, for the first time since May 9, while the S&P 500, which opened below its 100-day moving average, was only a few points away from breaching that level.

Yield on the benchmark US 10-year Treasury notes yield fell to their lowest level since mid-April to 2.84 per cent.

“There’s been a bit of a pullback in yields and obviously with the contraction on the curve, there could be implications from a financial standpoint in terms of the banks’ businesses that are tied to interest rates,” head of US equity trading at RBC Global Asset Management in Chicago, Ryan Larson said.

At 12.46pm on Tuesday local time, the Dow Jones Industrial Average was down 386.69 points, or 1.56 per cent, at 24,366.40, the S&P 500 was down 31.95 points, or 1.17 per cent, at 2689.38 and the Nasdaq Composite was down 46.15 points, or 0.62 per cent, at 7387.70.

The only gainers were the interest rate sensitive utilities, real estate companies.