The share prices of the big four ASX banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) are all lower.
It is a tough day for the S&P/ASX 200 Index (ASX: XJO) with the Australian share market being down more than 2%.
The CBA share price is currently down 2.6%. It's a similar story for the other banks. The Westpac share price is down 3.4%. National Australia Bank Ltd's (ASX: NAB) share price is down 2.7% and the Australia and New Zealand Banking Group (ASX: ANZ) share price is down 3.4%.
What's going on?
Most shares in the ASX 200 are down and the big four ASX banks certainly aren't showing the worst declines at the moment. The unwanted title of worst performer in the ASX 200 currently goes to Graincorp Ltd (ASX: GNC) which is down 8.4%.
There has been large scale selling overseas. Since the start of September there has been steady selling in the US. For example, overnight the Apple share price dropped 6.7% and it's actually down by 16% since 1 September 2020.
It's a similar story for many of the US tech shares like Microsoft and Alphabet which have also been sold off heavily.
The selloff has been particularly painful for electric car manufacturer Tesla. It dropped 21% overnight and it's down 34% since the end of August 2020.
The ASX is heavily influenced in the short-term by what happens in the US share market.
The US share market is often a barometer for the global market because many of the biggest US businesses generate their earnings from across the world. Facebook and Alphabet advertise across the world. Microsoft sells its software across the world. And so on.
Other negative news for the big four ASX banks
COVID-19 has already caused severe impacts across world both in human terms and economic damage.
One of the main things that the world is hoping for is a vaccine. An effective vaccine may allow the world to go back to normal. Or at least a new normal – the world may never be the same again.
However, there has been some unhelpful news from the UK. One of the main vaccine candidates, which is being developed by the University of Oxford and AstraZeneca, has been suspended because a phase 3 trial participant has suffered a potentially unexplained illness according to reporting.
There are 50,000 participants in the trial across the world, with 30,000 people in the United States.
If the whole world could go back to normal then plenty of troubled Australian businesses could see a return of activity. That would be good news for the big four ASX banks because it has loans across many different sectors. Industries like travel, tourism and international education could quickly rebound if people feel safe (and are allowed) to travel.
The big four ASX banks have already recognised billions of dollars of COVID-19 related provisions. Hopefully there aren't any more large unwanted surprises.
Are they buys?
Every ASX share could be worth a buy if it goes cheap enough. The banks have been drifting lower since the first half of June 2020. But I'm not sure they are clear buys yet.
There is still a lot of uncertainty and the economy could still go through a rough patch, particularly if the vaccine takes longer than expected to recover.
Out of the big four banks, I'd probably prefer CBA because it has a strong balance sheet, a solid dividend in this environment and it seems to have very good leadership which is important under the current conditions.
