ASX recovering after global bloodbath

US tech giants copped sizeable losses overnight as the battered ASX and Nikkei managed to make up some losses on Tuesday.

The ASX energy sector dipped 1.9 per cent by early afternoon, while financials pegged back more than 1 per cent early, settling to a 0.7 per cent gain about 2pm.

Discretionaries bounced back too, led by Wesfarmers (up 1.5 per cent), gambling machine manufacturer Aristocrat Leisure (1.6 per cent) and JB Hi-Fi (up 2 per cent).

The benchmark ASX 200 is up 0.4 per cent as at 2.30pm when the RBA left the cash rate at 4.35 per cent.

On Wall Street overnight, Nvidia lost 6.3 per cent to $100.45 after being down as much as 15 per cent during the session. Microsoft fell 3.3 per cent, Apple shed 4.8 per cent and Amazon slipped 4.8 per cent.

The S&P500 lost 160 points, falling 3 per cent to 5186.3 by close.

“US equity markets dived overnight as investors confronted heightened fears of a looming recession,” IG market analyst Tony Sycamore said.

“This turmoil was set up by a dramatic unwinding of the ‘Japan Trade’, leading to a staggering 15 per cent drop in the Nikkei yesterday.

“We suspect that yesterday’s frenzied sell-off was capitulation and the final act of cleansing of long positions in the Japan Trade. However, we do need further evidence of this in the sessions ahead.”

In the first two hours of trading on Tuesday, the Nikkei 225 gained 9 per cent. In afternoon trading the benchmark had settled at 10.2 per cent up for the day.

But that is no enough alone to recover the 12 per cent lost on the Tokyo exchange on Monday, which was the worst single day since the 1987 crash. The benchmarked dropped 5.8 per cent in the session prior as well.

Wall Street’s “fear gauge”, the CBOE Volatility Index, shot up before being settled by service-based companies data during Monday’s session.

That companies data was a “return to expansionary territory which doesn’t align with the current gloom surrounding impending recession”, Mr Sycamore said.

Against the greenback, the Australian dollar fell below 63.5c overnight before stabilising at 64.9c for a 0.25 per cent loss.

EToro market analyst Josh Gilbert said sentiment was settled, somewhat.

“After one of the worst days in global markets since the pandemic, it’s fair to say investors are going to feel uneasy,” Mr Gilbert said.

Markets had seem to find a footing and settled down after a “painful day” of trade on Monday, he said.

“However, it’s important to zoom out. Yesterday’s fall for the Nasdaq, S&P500, and ASX on a 5-year chart is merely a blip,” he said.

“Pullbacks are uncomfortable for investors, but they happen and are simply the price of entry into the stock market. Sell-offs of this magnitude highlight the importance of not timing the market and using a simple strategy such as dollar cost averaging.”

“In our view, this bull market isn’t finished yet. If we look to the US, solid earnings growth is a reason to be positive.”

More to come

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