Is the ASX set for more downside after Friday’s shocker?

Investors will be sizing up the week with much trepidation given the performance of the ASX on Friday and the disturbing finish to the week in the US.

The S&P/ASX 200 (XJO) fell 5% or 276 points to close at 5245 points.

After a week where investors had been largely bullish towards our market, with the XJO increasing from the previous Friday’s close of 5243 points to hit a high of 5522 points on Thursday, all of those gains were erased on Friday as the index finished the week at 5246 points.

Providing further concern are the steep falls experienced in overseas markets, particularly, the UK, mainland Europe and the US as they didn’t commence trading until after our markets closed on Friday.

Consequently, if we take our lead from overseas, markets could plummet again today.

The widespread nature of Friday’s sell-off suggests investors are walking away from equities in general, not just taking a negative stance towards certain sectors.

There were no bright lights on Friday with the big miners, banks and even healthcare stocks experiencing substantial falls.

Given the global backdrop and local investor sentiment on Friday it is hard to identify a sector that has the potential to rebound.

As a guide, the SPI200 futures is down seven points to 5230 points, perhaps suggesting that the ASX is already taken its hit ahead of the fallout in the UK, Europe and the US markets that were trading Friday evening Australian time.

24 hours

Examining activity across the time zones on Friday Australian time, Japan and the broader Asian region fared much better even, though the Nikkei 225 fell 574 points or 2.8%, closing at 19,619 points.

The Hang Seng weathered the storm to close slightly up at 24,643 points.

The Shanghai Composite was the best performer, up 1.3% or 37 points to 2860 points.

The writing was on the wall the moment the UK markets started trading with the FTSE 100 opening broadly in line with where it finished on the day at 5763 points.

This represented a fall of 138 points or 2.3%.

Germany and France were both down around 2.2% with the DAX plunging 246 points to 10,861 points and the CAC 40 shedding nearly 100 points to close at 4572 points.

In the US, the Dow finished the week at 23,723 points, with marked losses on Thursday and Friday leaving the index down more than 1000 points on the high struck mid-week.

The S&P 500 fell 2.8% or 81 points to finish at 2830 points.

The NASDAQ was hardest hit as it plummeted 3.2% or 284 points to close at 8604 points.

One of the few positive takeaways in the week was a rebound in the oil price, but bad news out of Shell tended to offset any upside.

For example, the S&P/ASX 200 Energy (XEJ) index slumped 454 points or 6.2% on Friday, suggesting investors are more focused on the negative market sentiment than the oil price.

Gold fell below US$1700 per ounce before closing at US$1710 per ounce.

The negative sentiment also rubbed off on base metals, most of which fell significantly.

Important Australian, US and China economic data

The Australian residential approvals data being released today will give an insight into the health of the building industry.

This will be followed on Tuesday by construction data and the RBA’s decision on the cash rate.

Consequently, stocks such as Adelaide Brighton, Boral, James Hardie, CSR, Fletcher Building and Brickworks will come under the microscope.

The data will also provide some insight into the likely performances of companies that provide furniture, fixtures and fittings.

These include plumbing, kitchen and bathroom supplies groups such as Reece, GWA and Reliance Worldwide, as well as furniture, white goods and lighting distributors and retailers such as Harvey Norman, JB Hi-Fi and Beacon Lighting.

In the US, the focus will be on factory orders and durable goods data, while in China the all-important PMI figure will provide some insight into the status of the country’s manufacturing industry.