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CBA has seen more than $26bn in market value melt away this year as investors shun the biggest stock on the index.

A US rate hike this month is now seen as a possibility, and markets are panicking.

• CBA shares strike 3-year low
• The Fed’s wake-up call
• Stocks erase 2016’s gains
• The stocks creeping higher amid rout
• A new and volatile territory for stocks

Welcome to the BusinessNow blog for Monday, September 12. The local sharemarket has slumped more than 2 per cent amid global concerns about interest rate moves.

8.37pm:Gold prices fluctuate on rates uncertainty

Gold prices swung between gains and losses in London trade on Monday, with investors looking for clues about the Federal Reserve’s policy moves.

Spot gold edged up 0.04 per cent to $1,328.65 a troy ounce in midmorning trade while other precious metals were down.

Among other precious metals, silver was down 0.4 per cent at $18.98 a troy ounce, platinum was down 1 per cent at $1,052.25 a troy ounce, and palladium was down 1.5 per cent at $667.13 a troy ounce. Dow Jones.

8.09pm: Getting ethical investing right

New Zealand’s government-backed superannuation savings scheme operator KiwiSaver has been enveloped by an investment storm over the past month that has left a trail of destruction,writes Tony Kaye.

It’s an embarrassing and messy situation, with Australia’s Westpac, ANZ and AMP among several KiwiSaver partners linked to investments in companies making antipersonnel mines, cluster bombs, nuclear reactors and other weapons via a fund run by US-based investment giant Vanguard.

The public backlash has been enormous and most of KiwiSaver’s service providers have announced they are offloading their weapons exposures.

On the surface, it would seem that ethical investing strategies by big corporations still have a long way to go. But investors committed to responsible investing practices, and committed to excluding investments in funds and companies that don’t tick all the boxes in terms of sustainability, protecting the environment and the rights of people and animals, shouldn’t be too disillusioned. Read more.

7.18pm:Why analysts still like property trusts

Eva Brocklehurst

Australia’s increasingly expensive real estate investment trusts (also known property trusts) remain an investor favourite, harbouring a string of stocks with an ability to grow returns in the months ahead, according to a batch of analyst reports released following the recent reporting season.

Underpinned by well positioned office portfolios, the A-REITs sector remains in demand, though slowing retail sales create some headwinds and residential valuations clearly look less compelling.

On a macro perspective, analysts put forward interest rates — especially the trajectory of US interest rates — as the outstanding issue for the sector in the months ahead.

From a sector perspective, ­office A-REITs are preferred over retail-focused property trusts while among property managers, the active managers of assets are regularly preferred over passive players. Read more.

6.57pm: Asian stocks end sharply lower

Asian shares started the week notably weaker as fears of a possible US interest-rate increase gripped markets, with investors assessing the potential impact on growth.

“We are taking the sell-off in the US [on Friday] very, very seriously, “ said Amir Anvarzadeh, global head of equity sales for Japan at BGC Partners. He said the equities weakness on both sides of the Pacific indicates a reversal in trend. “Whatever growth we are getting [globally] could slow down” if interest rates rise, Mr Anvarzadeh added.

Emerging markets in Asia are particularly vulnerable to a rate increase in the US as better returns there could prompt a flight of capital from less-developed areas. But some say strong growth and the potential for earnings to pick up faster in Asia will temper any sharp withdrawals.

Hong Kong’s Hang Seng Index skidded 3.3 per cent to 23310.33, the biggest drop since February, while Taiwan’s Taiex dropped 1.2 per cent — the lowest level in two months.

The Shanghai Composite shed 1.9 per cent, finishing at a one-month low and the Nikkei Stock Average ended down 1.7 per cent. Korea’s Kospi, which notched its largest decline in two months on Friday, topped that with a 2.3 per cent decline. Samsung Electronics Co, which makes up one-sixth of the index, notched its biggest decline in fouryears, with a 7 per cent slide on more worries about the Galaxy Note 7. Dow Jones.

6.28:Women “make board meetings too long”

“Poor blokes. They can no longer get a board seat unless they wear a skirt.”

This was one response given by a chair of an ASX 200 company in a letter to the Australian Institute of Company Directors when asked why the company had no women on its board,Glenda Korporaal writes.

AICD chair Elizabeth Proust retold the story at a lunch hosted by the Australian Israel Chamber of Commerce in Sydney yesterday.

She said the AICD had written to the chairs of ASX 200 companies which had no women or only one woman on their boards — some as many as four times — asking them why they didn’t have more women directors.

Other responses were: “We would rather have someone known to the board already.” Read more.

5.52pm:European stocks open sharply lower

Europe’s main stockmarkets fell sharply at the start of trading on Monday, mirroring a slide across Asia caused by the prospect of a US interest rate hike this month.

London’s benchmark FTSE 100 index shed 1.3 per cent to 6,690.12 points, compared with the close on Friday.

Frankfurt’s DAX 30 tumbled 1.8 percent to 10,380.46 points and the Paris CAC 40 retreated 1.7 percent in value to open at 4,415.23.

Speculation that the Fed may act as soon as this month on rate tightening had appeared to be off the table following a string of weak data.

But on Friday, US Federal Reserve Bank of Boston President Eric Rosengren renewed speculation of a hike when he said in a speech that higher rates were needed to prevent the economy from overheating.

That sent Wall Street tumbling on Friday, sentiment that fed into Asian trading on Monday. AFP

5.14pm:Dollar stabilises above key support

The Australian dollar began to stabilise in late trade on Monday, after earlier weakening sharply against the US dollar during a fear-driven sell-off.

Traders pulled out of the Australian dollar and ploughed into the US dollar in response to a surprise jump of 40 per cent in the volatility index, which is known as the fear gauge in financial markets. They also sold stocks, bonds, oil and gold amid mounting signs that a long period of ultralow interest rates is drawing to a close.

The Australian dollar has lost around 2 cents from a high of US77.33 cents during European trading on Thursday.

On Monday it briefly slipped below a key support at US75.25c, but stabilised later. At 5pm (AEST), the currency was trading at US75.28c.

“Friday night’s big risk-off move, with a 40 per cent rise in the [volatility index], could signal a turning point in market sentiment,” said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney. Read more.

4.25pm: Stocks close at 2-month low

Growing concerns about the prospect of an imminent US rate hike have forced the local market to its lowest level in two months, with a 6 per cent decline across the last three weeks wiping out all of 2016’s gains,Daniel Palmer writes.

At the closing bell, the benchmark S&P/ASX 200 index had sagged 119.6 points, or 2.24 per cent, to 5,219.6, while the broader All Ordinaries index dived 121.4 points, or 2.23 per cent, to 5,319.1.

At the head of the falls were the major resources names, although high-yield providers were also in the crosshairs of sellers in an extension of the recent trend away from previously well support dividend plays.

“Today’s sell-off looks to have powerful momentum so might easily have further to go,” CMC Markets chief market analyst Ric Spooner said. 1`

“At the very least this momentum suggests it might be a while before it would be prudent to assume the ASX200 is forming a base. Among other things, the last Fed rate hike triggered concerns about emerging market outflows and this might again trigger wider concerns.

“However, for many sectors in the Australian market, today’s sell-off is a just a continuation of an valuation adjustment that’s been going on for some weeks.” Read more.

3.55pm: Three reasons US growth is struggling

Federal Reserve Bank of Minneapolis President Neel Kashkari said demographic challenges, psychological scars from the financial crisis and lacklustre technological innovation are leading causes for the tepid economic recovery in the US.

In one of his first economic papers since joining the Minneapolis Fed in January, Mr Kashkari said that, “we are likely seeing a confluence of three fundamental causes all combining to slow the economic recovery ... Unfortunately, these headwinds aren’t likely to reverse anytime soon on their own.” Read more.

3.32pm:Asian stocks hit by Fed fears

Asian shares started the week notably weaker as investors assessed the impact of a possible US interest-rate increase on global growth.

Emerging markets in Asia are particularly vulnerable to a rate increase in the US as better returns there could prompt a flight of capital from less-developed areas. But some say strong growth and the potential for earnings to pick up faster in Asia will temper any sharp withdrawals.

After US stocks on Friday posted the biggest declines since the initial post-Brexit drops,

Hong Kong’s Hang Seng Index was down 2.8 per cent, reversing after last week’s 3.6 per cent jump. The Shanghai Composite fell 2.1 per cent, while the Nikkei Stock Average was down 1.7 per cent.

South Korea’s Kospi, which notched its largest decline in two months Friday, dropped 1.8 per cent as Samsung Electronics Co. threatens to post its biggest daily decline since October 2008.

“We are taking the sell-off in the US [on Friday] very, very seriously, “ said Amir Anvarzadeh, global head of equity sales for Japan at BGC Partners. Dow Jones.

3.13pm:Blue-chip bruising

The pessimism sweeping through global sharemarkets has forced some of the nation’s biggest names to multi-year lows,writes Daniel Palmer.

In bleak afternoon trade, Australia’s largest company, Commonwealth Bank, was off 1.3 per cent at $69.96, leaving it at risk of closing below $70 for the first time in three years.

Meanwhile, telco behemoth Telstra was trading below $5 for the first time in two-and-a-half years as yield stocks fell out of favour with investors warily eyeing a US Federal Reserve that seems intent on raising rates this year. Read more.

2.42pm: A parliamentary committee for everyone

From Richard Gluyas’ column today:

A couple of mates and I are tossing around the idea of setting up a parliamentary oversight committee.

And why not? Everyone’s doing it.

Take newbie Senator and anti-bank crusader Rodney Culleton, for example. A week or so ago, Culleton breathlessly announced his plan to set up a “high-calibre” committee to oversee the banking ombudsman and the parliamentary committee.

Heaven knows which “banking ombudsman” and which “parliamentary committee”. But who cares?

1.50pm:CBA shares strike three-year low

Commonwealth bank shares have slumped to their lowest level in three years as the market wipes away the bank’s premium valuation to peers.

CBA shares have fallen below $70 and are now at a three-year low. (Pic: AFP)

While CBA remains the biggest stock on the ASX200, its listed value has fallen $26.4 billion this year. Shares in the banking giant hit a low today of $69.71, which is 18.5 per cent below the $85.50 they were at the beginning of the year.

The other big banks are seeing worse falls today but CBA’s decline over the last few months has been more severe. At 1:11pm AEST CBA was down 1.5 per cent, Westpac had dropped 1.7 per cent, ANZ fell 2.4 per cent and NAB was down 2.5 per cent.

Morgan Stanley analysts were among the latest to slam CBA’s relatively expensive shares, downgrading the stock to underweight and offering some scathing commentary.

“We find the size of CBA’s premium vs peers increasingly difficult to justify due to slowing retail bank momentum, a flat [earnings per share] and dividend outlook, a lower [tier one capital] ratio and a narrower [return on equity] gap,” Morgan Stanley analysts, led by Richard Wiles, said on August 30.

Morgan Stanley highlighted the concerns that are clearly weighing heavily on the minds of investors.

“We see slowing momentum in retail banking, dilution from the corporate banking growth strategy, limited margin for error on loan losses and a potential A$7bn capital build.”

Under its most bearish scenario, CBA shares could fall all the way to $45.63 by this time next year, while the base case analysis from Morgan Stanley is for a not-much-cheerier $68.

While CBA is trading at its lowest level in three years, ANZ and NAB are only at their lowest in a month, while Westpac is at a two-month low.

1.30pm:The Fed’s wake-up call to markets

Three speeches scheduled to be delivered on Monday in the US may well determine whether the sell-off on Wall Street on Friday and the spike in the US dollar and in global bond yields is merely a blip in a long central bank-induced bull market or something more fundamental, writes Stephen Bartholomeusz.

Overnight, our time, Atlanta Federal Reserve Board president Dennis Lockhart is due to speak about monetary policy and the US economic outlook. Later in the day, the Minneapolis Fed president, Neel Kashkari, will take part in a discussion about the economy and financial sector.

Finally, and most importantly (as she’s the only one of the three who is a voting member of the Fed’s open market committee that decides monetary policy), Lael Brainard will also talk about the economic outlook and monetary policy in Chicago.

Not only is Ms Brainard’s speech the only one to be delivered by a voting member of the committee but, until last Thursday, it wasn’t scheduled. That has caused the markets to assign peculiar significance to it, speculating that she has been chosen to deliver a wake-up call to markets that, until, Friday, had dismissed the prospect of a Fed rate rise.
Read more

1.20pm:Woolies keeps mum on O’Brien payout

From John Durie’s column today:

Woolworths has not declared the cost of any payout to former boss Grant O’Brien, with the company’s annual report released late last week silent on the issue.

The report noted Mr O’Brien formally finished work at the company on August 1, which meant he had reached the age of 55, entitling him to participate in the company’s defined benefit scheme.

No executives were paid any short-term bonuses last year, although company secretary Richard Dammery received non-monetary benefits totalling $469,967 to bring his final pay to $1.6 million.
Read more

1.10pm:Aussie dollar slips on rate concerns

The Australian dollar is down as investors sell off risk currencies amid worldwide concerns about interest rate moves.

At 12.30 (AEST) on Monday, the local unit was trading at US75.28c, down from US75.41c on Friday.

OANDA Australia and Asia Pacific senior currency trader Stephen Innes said traders were selling off risk currencies like the Aussie dollar amid hawkishness from the European Central Bank and market jitters about rate moves in the US.

“We could be on the verge of a powerful concurrence of factors as volatility takes grip,” he said in a note.

“Traders have been quick to price in worst case scenario as interest rate rise jitter start taking hold and has resulted in some fairly assertive moves in bond, equity, and forex asset classes.”

12.57pm:Commercial loans jump 9%

Home loans for owner occupiers have fallen 3.1 per cent to $19.9 billion, but commercial loans, which include investor mortgages, have soared 9 per cent to $38.9 billion.

Meanwhile, the value of new personal loans in July jumped 3.9 per cent to $7.1 billion, compared to June’s $6.9 billion, Australian Bureau of Statistics lending finance figures released on Monday show.

Lease Loans, however, slumped 8.7 per cent to $491 million, the seasonally adjusted figures show.

AAP

12.40pm:$31bn wiped off market

The red ink that stained US markets on Friday night has quickly spread, with concerns around the fading impact of monetary policy forcing the Australian sharemarket below where it started the year.

At 12pm (AEST), the benchmark S & P/ASX 200 index wilted 108.9 points, or 2.04 per cent, to 5,230.3, while the broader All Ordinaries index slumped 110.4 points, or 2.03 per cent, to 5,330.1.

The vicious sell-off had by noon wiped around $31 billion from the local market and left the benchmark index at its lowest mark in two months.
Daniel Palmer
Read more

12.30pm:10-year bond yield rises above 2%

Australia's 10-year bond yield rises above 2% for the first time since early July pic.twitter.com/B1zJMPjJJ8

— David Ingles (@DavidInglesTV) September 12, 2016

Australian bonds are finding themselves back above 2 per cent for the first time in two months. As Alan Kohler explains today “never before have stocks and bonds been this expensive simultaneously”.

12.15pm:Ziggy Switkowski quits Oil Search board

Papua New Guinea-focused energy group Oil Search has announced the departure of Ziggy Switkowski among two board changes.

Dr Switkowski, the former Telstra boss and current Suncorp and NBN Co chairman, will retire at the end of the year, while Oil Search (OSH) said fellow director Bart Philemon will stand aside at the end of this month.

Mr Philemon will be replaced by Mel Togolo from October 1, with the latter currently serving as PNG country manager for Nautilus Minerals.
Daniel Palmer

Read more

11.58am:Your 10-second guide to today’s ASX slump

Around $31 billion in value has been wiped off the S&P/ASX 200 in today’s 2 per cent slump, here are the dot points:

•Worst one-day fall since Brexit (June 24)

•Seventh-worst fall of 2016

•Weakest level for the ASX 200 since July 11

•The market has lost over 6 per cent in three weeks

•Only four stocks of 200 are in positive territory

•The energy sector is the hardest hit, followed by materials, consumer discretionary, utilities and the heavy financial sector.

Savage selling gripped Wall Street on Friday following fears the Federal Reserve could surprise the financial world with a rate hike in September.
Read more

11.30am:Today’s market misery loves company

It’s not pretty out there, but at least the rest of the region is in just as much pain as the ASX is.

At just before 11am, the New Zealand market had given up 2.2 per cent, the ASX 200 was down 2 per cent, South Korean stocks had lost 1.5 per cent and Japan’s Nikkei lost 1 per cent.

The falls are amazingly broadbased, with around 90 per cent of Asia-Pacific stocks trading lower, according to Bloomberg.

11.25am:Cabcharge chairman to step down

Cabcharge chairman Russell Balding will step down from the payment service and taxi network operation after two-and-a-half years in the role.

Cabcharge chairman Russell Balding has resigned.

The former managing director of the ABC and chief executive of Sydney Airport Corporation joined the Cabcharge board in 2011 before assuming the chairmanship in May 2014.

He will formally depart after the group’s AGM on November 24, with a replacement not yet named.

The exit of Mr Balding comes as Cabcharge fights a changing landscape, with the arrival of Uber pressuring the incumbent taxi sector.
Daniel Palmer

11.01am:Insurers ‘failing consumers’: ASIC

The corporate watchdog says Australian insurance companies are “failing consumers” after finding add-on policies sold through car dealers were raking in millions of dollars with expensive and poor value products which had little or no benefit.

The Australian Securities and Investments Commission today said it was putting the sector on notice to address the “serious failures” which included a sales environment with pressure selling, very high commission and conflicts of interest.

The add-on policies, which were designed to cover risks relating to the car or the loan used to purchase a vehicle, included policies such as consumer credit insurance and tyre and rim insurance.
Michael Roddan
More to come

10.44am:The 4 stocks creeping higher amid rout

Only four stocks on the ASX 200 didn’t fall at the open.

Southern Cross (+0.8%), Seven West Media (+0.7%), Coca-Cola Amatil (+0.5%) and Syrah Resources (+0.3%) were the only members of the ASX 200 to creep higher this morning as the index gets smashed following a nasty Wall Street sell-off on Friday.

At 10:20am AEST the local market was caught in a broad 1.7 per cent sell-off, with no stock falling more than 6.2 per cent.

BHP Billiton gave up a much-worse-than-expected 3.2 per cent as the wide market move was made worse for resources stocks by falling iron ore and oil prices. The energy and material sectors were the worst performing this morning.

Only one stock, Wesfarmers, saw a fall of less than 1 per cent at the open as the market plunged below where it started the year. (See below post)

10.27am:Stocks give up all of 2016’s gains

The Australian sharemarket is back trading below where it started the year after a vicious sell-off on US markets on Friday night carried through to the local session.

At the 10.15am (AEST) official market open, the benchmark S&P/ASX 200 index slumped 96.6 points, or 1.81 per cent, to 5,242.6, while the broader All Ordinaries index dipped 94.4 points, or 1.74 per cent, to 5,346.1. At the start of the year the S&P/ASX 200 was at 5295.9, while the All Ordinaries index sat at 5344.6.

The figures put the benchmark at its lowest mark since July 8, with the market off 6 per cent across the past three weeks.

Resources were hardest hit after commodity prices weakened on a rising US dollar.

Mining giant BHP Billiton stumbled 2.9 per cent to $20.17, its primary rival Rio Tinto lost 1.9 per cent to $47.68 and iron ore miner Fortescue plunged 4.1 per cent to $4.745.
Daniel Palmer
Read more

10.15am:Market darlings in the firing line

Today’s worst falls could be seen by the market’s favourite darlings, according to CMC Markets chief analyst Ric Spooner.

Market darlings could bear the brunt of the sell-off. Britta Campion / The Australian.

Yes, hefty falls in the most recent Wall Street session look set to knock the local market, but broadly speaking this sell-off has been happening for some time, Mr Spooner said.

“Friday’s large drop in broader US stock indices is likely to trigger ongoing selling in the Australian market today. However, this yield adjustment has been underway in some sections of the stock market for some weeks.

“In Australia, the yield sensitive utilities sector finished 10 per cent below its peak while the Real Estate Investment Trust sector is already 9 per cent below its peak,” he said.

“The financial sector is also already 4.5 per cent below its peak. In the US, the S&P 500 utilities sector is also already 9 per cent below its current peak.

“This may mean that the current sell-off, while likely to have further to go may not be a severe as may seem likely. Perhaps the greatest vulnerability is now in the market darling stocks that have been well supported in recent weeks.”

10.04am:Elders ceases live exports

Agribusiness giant Elders has announced a stunning restructure that will see the group cease shipping live animals.

In an update to the market today, Elders said a review had led it to immediately exit the long haul live export industry, while it will look to sell its short haul and airfreight operation.

The updates come in the wake of a tighter regulatory environment and red ink flowing in the long haul business — which focuses on cattle shipments to China — in the first half.

Elders said it would continue to participate in the live export industry by finding opportunities for its producer clients and accumulating cattle for exporters.
Daniel Palmer
Read more

9.51am:Grain industry under threat

Russia has become the world’s biggest exporter of wheat, knocking Australia out of global top three ranking and posing a serious threat to the future of Australia’s $12 billion grain industry, Sue Neales reports.

A new report by the Australian Export Grains Innovation Centre released today, analysing the Russian grains industry, predicts grain exports from Russia will surge a further 60 per cent by 2030, resulting in increased low-cost competition in Australia’s key Asian markets.

The report’s lead author, Professor Ross Kingwell, said Russia’s rapidly-growing wheat production, the devalued Russian rouble and its low supply chain costs should be of great concern to Australia.
Read more

9.35am:Three former execs charged in Tesco probe

Britain’s Serious Fraud Office has charged three former senior Tesco executives with fraud in its investigation into accounting practices at the country’s biggest supermarket chain.

A £250 million ($439.95m) overstatement of Tesco’s first-half profits in August 2014, due to booking deals with suppliers too early, led to the suspension of eight senior members of staff in the following months.

None of them commented at the time.

When Tesco revealed the overstatement, which was later raised to £263 million, it plunged the firm into the worst crisis in its near 100-year history and led to a £4 billion drop in the company’s stock market value.
Read more

9.20am:Gina Rinehart sets sights on AFA

The Australian Food and Agriculture Company, backed by veteran stock picker Colin Bell and global hedge fund manager Ray Dalio, could be on the radar of billionaire Gina Rinehart. It comes as the wealthy mining tycoon also sets her sights on the country’s largest privately held pastoral empire S. Kidman and Co.

A spokesman for Mrs Rinehart’s company, Hancock Prospecting, did not comment on Friday about the speculation, while Bell Financial did not respond when contacted. However, one source late last week noted Rinehart’s interest.
Bridget Carter, Gretchen Friemann
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9.00am:Resources under the pump

It looks set to be a brutal session on the local market, with hefty Wall Street falls likely to weigh on most Australian sectors, but resources could come under extra pressure.

The price of iron ore delivered to the port on Qingdao slipped another 0.6 per cent in the most recent session to $57.78 a tonne, which means it has now dropped 2.5 per cent in five days.

Meanwhile the price of WTI crude oil started the day off almost 1 per cent lower at $US45.44 and now sits 4.6 per cent lower over the last two sessions.

Brent crude is showing similar falls of 0.8 per cent this morning and 4.7 per cent over the last two days to $47.61.

BHP Billiton is heading for a 1.9 per cent fall at the open, according to its ADRs, while oil and mining stocks in general could struggle today.

8.53am:Stocks set to slump at the open

Australian stocks look set to tumble at the open following a Fed-induced panic on Wall Street.

Wall Street went into a panic at the prospect of the Fed hiking rates. Pic: AFP

Despite the Fed’s best efforts to talk up a ‘live’ meeting in September, around 85 per cent of Wall Street economists had been predicting the Bank would keep rates on hold, so Fed officials are now doling out reality checks.

Wall Street dropped a whopping 2.5 per cent on juiced-up rate hike concerns, and that looks sure to spread into the Australian session today.

The SPI200 is pointing to a 1.5 per cent fall at the open but fair value suggests a 1.7 per cent drop could be more likely.

A fall that size would be the biggest we’ve seen since the Brexit shock on June 24 and would take the index to a fresh nine-week low.

And considering the ASX 200 has just notched up its fourth weekly fall in a row it puts the index in an even uglier spot.

8.40am:LNG boom isn’t over yet

Australia’s decade-long gas investment boom could have further to run, with looming spare capacity at the nation’s oldest LNG plants providing the potential for $20 billion of development decisions in the next five years, writes Matt Chambers.

Potential appetite for the new investment was evident this past week when North West Shelf LNG project operator Woodside Petroleum struck a low-cost deal with its Shelf partner BHP Billiton to buy a 25 per cent stake in the big, remote Scarborough gas fields.

Many pundits had written off the remote fields as having little chance of development under owners BHP and ExxonMobil, ­especially amid depressed prices.
Read more

8.20am:A new and volatile territory for stocks

From Alan Kohler’s column today:

The Vix index of volatility spiked 50 per cent on Friday, from a two-year low on Thursday; US share prices fell 2.5 per cent and bond prices fell about 2 per cent as well. Investors in Australia today are likely to be humming the Boomtown Rats’ tune, “I don’t like Mondays”.

Following UK’s Brexit vote, markets were falsely lulled by extreme tranquillity. Volatility fell to near-record lows, the sharemarket held record highs and bond prices were also at record highs.

Never before have stocks and bonds been this expensive simultaneously. Usually market confidence in the growth prospects of companies portends inflation, which is anathema to bonds; on the other hand, low bond yields usually predict low growth, which is bad for corporate profits, and therefore share prices.

Simultaneous bull markets in stocks and bonds is the artificial result of monetary policy suppressing volatility and driving bond prices higher with central bank buying, as part of quantitative easing.
Read more

7.00am: Stocks set to open sharply lower

The Australian sharemarket is expected to open sharply lower today, after Wall Street experienced its biggest one-day sell-off since the Brexit decision on the back of a senior US central bank official flagging that interest rates could soon be raised.

Futures trading on the S & P/ASX200 last night indicated that the benchmark index could open up to 79 points — or 1.5 per cent — lower today after the US market sell-off on Friday night.

The Dow Jones Industrial index plunged 394.46 points, or 2.1 per cent, to 18085.45. The S & P 500 declined 53.49 points, or 2.5 per cent, to 2127.81. The percentage drop was the biggest for both indexes since June 24. The Nasdaq Composite Index lost 133.57 points, or 2.5 per cent, to 5125.91. Yields on 10-year US Treasury notes jumped to 1.671 per cent, their highest level since June 23. Bond yields rise as prices fall.

Across the region, the major Hong Kong and Tokyo markets are expected to open in negative territory, which would end the recent run of equity gains.

The tone was set after Federal Reserve Bank of Boston president Eric Rosengren, normally considered a ‘‘dove’’ by central bank watchers, said it was likely that interest rates in the US would be tightened shortly.

The Federal Open Market Committee, the branch of the Federal Reserve Board that determines the direction of monetary policy, is due to meet on September 20-21, and Mr Rosengren’s comments have brought forward the financial markets’ expectations of a rate hike.

In Australia, the market on Friday fell as investor concern about a possible end to European monetary stimulus hit a final negative note in a week of decline for local stocks.

The benchmark S & P/ASX200 index was down 46.6 points, or 0.87 per cent, at 5,339.2 points.

The broader All Ordinaries index fell 44.1 points, or 0.8 per cent, at 5,440.5 points.
Scott Murdoch
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6.50am:Dollar slips

The Australian dollar has fallen against the greenback.

At 6.37am (AEST), the local unit was trading at US75.40 cents, down from US76.33 cents on Friday.

AAP

6.40am:Iron ore snaps losing streak

The iron ore price has arrested its string of declines, pausing in the most recent session slightly above its six-week low.

Iron ore inched up 0.2 per cent to $US57.50, from $US57.40 the previous day, snapping a four-day losing streak.
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