The gloom continues for shareholders this week, with the Australian market opening at a four-month low on Monday, and immediately losing almost a full percentage point in its first 25 minutes of trading.
The ASX opened at 5895.7 points – its lowest open since late April and down 7.2 per cent on the highs at the end of August. At lunchtime on Monday (ADST), the market was down 1.17 per cent.
Among the stocks hit hardest were the Commonwealth Bank (down 1.5 per cent), the ANZ (down 1.8 per cent), Seven West Media (down 5.6 per cent) and real estate advertiser Domain Holdings (down 4 per cent). Bucking the trend were energy company ERM Power (up 2.5 per cent) and communications technology company Speedcast International (up 5 per cent).
Sharemarkets around the world have been been battered in recent days after US stocks – particularly in technology – took a tumble.
The US benchmark S&P 500 showed signs of recovery on Friday, ending a six-day losing streak. Technology stocks recovered after a week of losses and investors appeared to be looking for bargains ahead of the third quarter earnings reporting season.
The technology sector’s biggest boosts were Apple and Microsoft, which rose more than 3.0 per cent.
Even the hard-hit S&P500 energy and financial sectors managed to close Friday’s session with slight gains after a late afternoon rally.
The S&P technology index gained 3.2 per cent on the day, showing its strongest one-day gain since March 26, although it still registered its biggest weekly drop since March 23.
Shane Oliver, the chief economist for financial services institution AMP, said the sharemarket volatility would likely continue but was unlikely to trigger a bear market (where investors begin to sell for fear of losing money).
“History tells us that [bear markets] invariably require a US recession,” Mr Oliver said, and the economic conditions in the US aren’t right for that at the present.
Instead, he said the trend was for markets to likely “remain up beyond the near term pull back”.
Meanwhile, on Wall Street, there were signs confidence was returning among investors.
“People are starting to buy in, thinking the higher-flying growth stocks were oversold. They wanted to get in before next week, when earnings start coming,” said Janna Sampson at OakBrook Investments LLC.
But until the US and China reach a trade deal, the market rebound could be vulnerable as investors are anxious about the effect of tariffs on corporate profits.
“If earnings come out good I think this rally is sustainable if we don’t get negative trade news. Trade news is the wild card. That’s the big if,” Ms Sampson said.
The upcoming quarterly reporting season will give the clearest picture yet of the effect on profits from US President Donald Trump’s trade war with China.
Earnings at S&P 500 companies are estimated to have risen 21.5 per cent in the third quarter, according to figures from market data firm Refinitiv. That will be a slowdown on the previous two quarters.