Interpac Business and Migration Solutions Melbourne Australia

（June 30, 2010）

The Australian dollar also picked up off its lows and was trading back above US85 cents by the same time.

In a mid-year update, fund manager Fidelity International said conditions for equities would be more appealing in the second half before a strong rally in 2011.

“Valuations are still good and I believe there will be good buying opportunities later in the year,” said Trevor Green, Fidelity’s international director of asset allocation, in a note.

“So, investors who missed out on the first leg of the bull market may find themselves presented with attractive entry points in the coming months.

“While the pace of the recovery will slow into 2011, global growth remains strong and I believe we are unlikely to see a double-dip recession.

“There will be a number of attractive entry points for investors in the second half of 2010 and I am optimistic about 2011, so watch this space,” he said.

The weakness in the domestic market came after sharp sell-offs in Chinese, European and North American equities and a slump in commodity prices such as copper and oil.

The selling in global equity markets was “vicious”, Westpac analysts said.

The Australian dollar also suffered as investors’ fears deepened that the global economy was heading toward a double-dip recession.

Sparking the latest jitters was a US Conference Board indicator on China showing a sharp revision lower, fuelling concerns about the risks to global growth.

HSBC’s co-head of Asian economics research, Qu Hongbin, told clients in a research note to prepare for lower readings on China’s economic data.

“The overheated economy is cooling off amid the impact of both quantitative and micro tightening,” he said. “However, it is a just slowdown, not meltdown.

“We still expect around 9 per cent GDP growth in the second half and 2011.”

By early afternoon, the benchmark S&P/ASX 200 was down 67.1 points, or 1.6 per cent, to 4278.6, having earlier touched 4249.5 - its lowest level since August.

The All Ordinaries was lower by 68.7 points (1.6 per cent) at 4301.4.

The gyrations in global markets and worries over the European debt crisis in recent weeks have prompted financial markets to price no chance that the Reserve Bank of Australia will raise interest rates over the next 12 months. In fact, financial markets this morning priced in a 10 per cent chance of a rate cut at the RBA’s meeting next week.

The weak start to the Australian market came after Wall Street tumbled following a steep drop in consumer confidence in the world’s biggest economy.

The broad-market S&P 500 slumped 3 per cent to an eight-month low.

“The (S&P 500) index is at a critical technical level - around 1040 - which has provided support four times this year,” Westpac analysts said.

“The VIX barometer of risk aversion gapped 5 points higher to 34.”

Investors fled assets linked to growth, such as the Australia dollar, which fell as low as US84.75 cents in the New York session - a slide of 1.9 per cent since yesterday’s domestic close and a fall of 3 per cent since Monday’s close.

By early afternoon, the Aussie dollar was trading at about US85.10c after ranging between US84.65c and US85.11c in the domestic morning session.

On Wall Street, investors had sought shelter in US Treasuries, pushing the US government two-year bond yield to a record low, below the level reached after Lehman Brothers collapsed in 2008 during the darkest days of the global financial crisis.

The US 10-year bond yield closed below 3 per cent.

“People’s worst fears are starting to materialise - there simply isn’t enough growth around to create jobs (in the US),” IG Markets analyst Ben Potter said in a note.

“Jobs creation is still the one thing this recovery has lacked in the US.”

(Source from: TheAustralian)