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ASX nervous over 5000

The S&P/ASX 200  (ASX: XJO)(^AXJO) has again been punished by Chinese manufacturing figures and mixed reactions to Ben Benanke’s message about US bond buying Thursday morning.

Yesterday afternoon, the benchmark dropped to 96 points below its open, sending it down a whole 200 points in two days. Today the banks were joined by Echo Entertainment Group (ASX: EGP) and Telstra (ASX: TLS) at the top of the loser board.

Following the U.S Federal Reserve statement about reducing its quantitative easing program in coming months, offshore selling has sent local shares below a four-week low.

The market has been in a state of flux as the dollar plummets and doubts over the resources sector weigh on consumer sentiment.  In addition, banks and other high yielding shares, which have witnessed massive gains in recent months, have begun an inevitable fall downwards.

IG Strategist Evan Lucas said “The Aussie dollar is sliding against all its major peers” and “it looks like offshore selling of high-yield and defensive stocks continues”.

US markets haven’t been as hard hit by the news from China and the Fed, as a result the Dow Jones (^DJI) ended down 0.08% overnight.

It seems the culmination of all the news has made Aussie investors look forward to the weekend. Perhaps it’ll be a chance to catch our breath from what has been a volatile week.

Foolish takeaway

The markets rallied over the past four weeks and a correction was needed. Early in the coming week we should see a rebound from stocks like Telstra and perhaps even the banks. To quote the best investor ever (Warren Buffett) “Be fearful when others are greedy, and be greedy when others are fearful” or in other words, now is the time to bag a bargain.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz has no financial interest in any of the mentioned companies.

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