By Greg Peel

The Dow fell 145 points or 1.4% while the S&P dropped 1.7% to 1073 and the Nasdaq lost 1.6%.

Yesterday's events in Australia were arguably the most tumultuous since the sacking of Gough Whitlam and just go to show, on either side of the political aisle, that Australia's leaders now lead by following.

The ascension of Julia Gillard failed to produce any notable strength in the resource sector, mostly because Gillard did not suddenly drop the RSPT in her first hour as prime minister but simply vowed to continue negotiations, and likely also because there is a general market belief some compromise in the mining tax is already priced in.

As for Wall Street, last night's trade appeared little more than a delayed reaction to Wednesday's news, or at the very least evidence that markets are now coming to accept that a global double-dip is likely. It may not be a double-dip return to recession, but one half of Wall Street is strenuously arguing that pervading estimates of 3-4% GDP growth in the US in the September quarter are the stuff of fantasy. Alternate numbers of 1.5% are being offered.

This week's two very bad housing data releases in the US, and the Fed's effective downgrading of its economic forecast on Wednesday have been a catalyst for Wall Street to focus the impact of austerity in Europe (not to mention ongoing sovereign risk), restraint in China, and now weakening data locally.

Last night the weekly jobless claims number showed a fall of 19,000, which once might have been considered positive. But the smart money knows it's pointless to jump at every weekly claims number given inherent volatility, but rather that the trend is the indicator. New jobless claims are currently running at 457,000 per week seasonally adjusted, and economists suggest this number has to fall below 400,000 before one can assume the unemployment rate will fall.

Economists had also been expecting a drop of 1.4% in May new durable goods orders, so a fall of 1.1% might have been considered positive. Indeed, take out lumpy aircraft orders and net orders actually rose 0.9%. But the fact remains the number is negative after a run of positives, and indeed the biggest drop since August last year.

After-the-bell early profit reports in the tech space were also mixed. Database specialist Oracle posted a strong result which sees its shares up 3.5% in the after-market, while Blackberry-grower Research in Motion's shares are down 4% after disappointing. It seems the apple is rising to usurp the blackberry.

Wall Street's fall followed earlier falls in Asia and Europe which were driven by the writing on the wall which the Street initially failed to respond to. Australia was dealing with local issues. But despite the big drop in stocks this was not so much of a “flight to quality” panic but more of a resigned ennui. The fall came despite a slight rise in the euro, gold rallied but only by US$6.10 to US$1243.40/oz, and the benchmark ten-year bond was relatively steady at 3.14%.

There was nevertheless surprisingly strong demand for the Treasury's auction of US$30bn of seven-year notes despite lacklustre demand for the fives on Wednesday. This might be attributable to the fact the Treasury only reintroduced the seven-year series last year after a sixteen year absence. The settlement yield of 2.575% was the lowest in over a year and foreign central banks bought 51% compared to a 48% running average.

The US dollar index ticked down slightly to 85.75 sending oil up US21c to US$76.51/bbl. Base metals, on the other hand, played their own game.

In somewhat of a shock to the system, the LME has actually seen a return recently of “real” trading as opposed to the speculative activity from the headless chook commodity funds which has dominated for most of 2010. According to basemetals.com, a shortage of copper concentrate supply in South East Asia and a dip of inventories on the LME has seen a brief supply squeeze. Last night copper jumped 2.7% to push close to the US$7000/t mark and cross the US$3.00/lb mark.

The rest of the complex chimed in with 1-2% moves except for zinc which was up another 3%. Zinc has suddenly become popular in China, apparently, because of its discount to copper. I'm not sure you can wire a house with zinc.

The Aussie finished the 24-hour period down 0.8 of a cent to US$0.8670. Turmoil at the top is never well received by currency traders.

The SPI Overnight fell 59 points or 1.3%.

In late news, there appears to be some concession agreed to with regard to proprietary trading in the ongoing financial reform bill saga currently being played out on Congress. While this is a positive for US banks, there is still a long way to go.

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