Market wipes off $22 billion

ASX falls 1.5% before recovering somewhat

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The S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) has plummeted in early morning trade today, wiping off $22 billion in value after dropping 1.5% to 5,161.3.

Happy post-Australia Day public holiday investors!

However, by lunchtime the market had recovered slightly, to be down just 0.8%, and appears to be headed higher.

The jitters have again been caused by the usual suspects:

  • Fear of a hard landing in China, after economic data revealed last week that manufacturing in that country may be declining,
  • Uncertainty over whether the US Federal Reserve will increase its tapering, with Bloomberg reporting that the Fed may drop its quantitative easing by another US$10 billion when it meets this week, to US$65 billion, and,
  • Investors scaling back their exposure to emerging markets in the face of the above two factors

Emerging countries such as Brazil, Turkey, India and Russia have all seen their stockmarkets hammered, while emerging market currencies across the globe, from South Africa to Turkey have been clobbered as the US dollar rises.

Macquarie Group (ASX: MQG), BHP Billiton (ASX: BHP) and National Australia Bank (ASX: NAB) are leading the falls today, down 2.5%, 1.7% and 1.3% respectively, but all the big four banks are being hit.

Among the big caps, Woodside Petroleum (ASX: WPL) and Brambles (ASX: BXB) have posted the most positive gains, both rising 0.3% in lunchtime trading.

The best gainer on the ASX 200 by a country mile has been JB Hi-Fi (ASX: JBH), after the consumer electronics retailer went against the recent trend of negative retail updates, and reported that its half-year profit is expected to rise by 10%, and confirmed its full year sales guidance.

Foolish takeaway

The good news is that the Aussie dollar is currently buying 87.6 US cents, meaning Australian companies with offshore earnings and our resources stocks could see higher earnings this year. That is also likely to be good for our economy.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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