Red ink everywhere as market lump deepened overnight.

Markets fell across Asia, Europe and the US yesterday and overnight as the Australian dollar slumped, sharemarkets plunged and gold soared past $US1700 an ounce.

The Dow suffered its sixth biggest fall in history, losing more than 630 points.

The plunge had our market looking at a 150 point fall when trading starts at 10 am, according to the futures market.

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The selling was driven by fear, the S&P ratings decision on the US and warnings that some Asian countries and issuers might face ratings cuts if the rout triggered a global slump, and follow on ratings cuts for hundreds of groups in the US dependant on the AAA rating.

After big falls in Asia, European markets were weaker at the start, but steadied on the European Central Bank statement late Sunday supporting government debt got through to investors.

The ECB statement also helped US share futures steady after big early losses in Asian trading.

But that didn't last and markets in Europe fell for the rest of the session, losing between 2 and 5% by the close.

The selling wave continued in the US and the Dow ended off more than 630 points or 5.5%.

The falls on other markets were larger: Nasdaq shed 6.9%, the S&P 500, 6.6% as the selling went on up to the final bell.

The newly AA plus-rated US Treasury bonds saw another sharp fall in yield to 2.34% for the 10 year security, a fall of 0.22% which meant a massive rise in price on the day.

After opening lower in early trading, then steadying, Asian markets slumped again in afternoon trading after another statement from S&P.

The ratings group warned that Asian sovereign ratings could face downgrades if global financial markets deteriorate.

Not even news that the European Central Bank would support eurozone government bonds (read Italy and Spain especially) and a statement of concern from the Group of Seven countries, were enough to prevent the afternoon slide, or hold back the tide of selling in Europe as the day went on.

Gold settled at $US1,713.20 an ounce in New York after the record surge in Asian and European trading.

The price continued rising in after hours trading, hitting $US1,720 an ounce around 7 am, a rise of 4.2% on the day.

Copper, the most sensitive industrial metal, shed 4.5% to just over $US3.93 a pound in New York.

Gold futures went as high as $US1,718.20 an ounce during the session in Asia yesterday.

December gold futures rose $US54.10, or 3.3%, to end at $US1,705.90 an ounce in Asian trading. Spot gold also climbed $US41.70, or 2.5%, to $US1,705.10.

Both went higher in US trading as some dealers talked about $US1,800 an ounce and higher by the end of this week.

Nymex WTI crude futures fell under $US84 a barrel in Asia as well, and kept falling in Europe and the US to end the session at $US81.40 a barrel.

In after hours trading it fell to $US80.99 a barrel in New York, the lowest it has been for eight months.

In London Brent crude dropped 5.2% to $US103.74 a barrel.

The US dollar rose against the euro, yen and the Aussie dollar which lost a cent against the greenback to trade around $US1.353.

It continued falling in late trading and by 7 am in Sydney had dropped to $US1.0190.

Footnote: According to S&P, there are just four American companies now with AAA ratings (which makes them better credit risks than the US Government).

They are Automatic Data Processing, Exxon Mobil, Johnson & Johnson, and Microsoft.

Copyright Australasian Investment Review.
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