Investors are pulling on their coats to protect themselves from the bloodbath that is expected on the Australian sharemarket as trading resumes on Monday.
The benchmark index is forecast to plunge by more than 4%, based on futures trading on the Australian Securities Exchange (ASX), when the market opens at 10:00am AEST (12:00pm Sunday).
Memories of the COVID-19 global pandemic will be revived if this comes to pass because it would represent the most savage ASX market beating since 2020.
The pull back in the Australian market officially returned to being a correction on Friday when the S&P/ASX 200 index fell 2.4% to 7,667.8 points, its the lowest level in eight months.
Th pre-conditions for a price mauling on Monday were set later on Friday on Wall Street, where the major stock indices suffered their biggest losses since the dark days of the pandemic.
The catalyst was an escalation of trade tensions between the United States and China when the world’s second most populist nation responded to new U.S. tariffs with a 34% levy on imports of American goods.
This intensified fears of a global trade war and recession, prompting hopes the U.S. Federal Reserve Board would keep lowering interest rates and sparking a continuing plunge in bond yields.
As a result the Dow Jones Industrial Average fell 5.5%, the S&P 500 plunged 6% and the Nasdaq Composite ended in bear market territory with a 5.8% loss on Friday (Saturday AEDT).
CommSec said the growing panic among investors was highlighted by the CBOE Volatility Index, which is considered to be Wall Street's ‘fear gauge’, closing at its highest level since April 2020.
At 8:30 am AEST the S&P/ASX 200 June 2025 share price index contract was trading 331 points, or 4.2% lower, at 7,388.
“That’s a tough question to answer,” Chief CommSec Economist Ryan Felsman told Azzet when asked where and when the market would bottom out.
He said weakness had been widespread in markets on Friday with the crude oil price touching a four year low, financial stocks diving on concerns about the effect of lower rates, gold and base metal prices slumping and iron ore futures also falling.
“There was nowhere to hide,” said Felsman.
He said market participants this week would watch U.S. inflation data and corporate earnings announcements, starting with financial stocks.
On the bond market, the yield on Australian 10-year government paper defied the global direction by rising 1.85% to 4.232% but the two-year yield dropped 2.58% to 3.393%.
