What you need2know:

• SPI futures down 9 points at 5351

• AUD at 88.79 US cents, 96.56 Japanese yen, 69.11 Euro cents and 54.26 British pence

• In the US, S&P -0.8%, Dow -0.6%, Nasdaq -1.1%

• In Europe, Euro Stoxx 50 -0.5%, FTSE -0.9%, CAC -0.4%, DAX -0.5%

• Iron ore falls 2.3% to $US79.80 per metric tonne

• Spot gold down 0.1% to $US1214.97 an ounce

• Brent oil is 1.4% lower at $US97.00 per barrel.

What’s on today

US, China, Europe flash manufacturing data released; Australia weekly consumer confidence.

Stocks to watch

BHP ADRs were down more than 3 per cent overnight and on the London sharemarket, Rio Tinto lost 3.8 per cent and BHP Billiton was down 3.5 per cent.

Currencies

The Australian dollar slipped below US89¢, dropping to US88.53¢ in overnight trade, compared with US89.05¢ late on Monday afternoon. At around 6am it was around US88.76¢.

“Investor sentiment on the AUD appears to be shifting aggressively to the downside despite the carry,” said Stephen Innes, senior trader at OANDA Asia Pacific.

“There isn’t much in the way of major domestic or international data releases due this week that will provide market guidance. However, traders will keep an eye on the Reserve Bank of Australia’s bi-annual Financial Stability Review which is due on Wednesday.”

Over the weekend, central bankers and finance ministers from the Group of 20 leading nations met in Cairns and collectively pledged to boost spending to address the world’s uneven economic growth.

“The G20 meeting yielded little in terms of meaningful, market-moving news,” Innes said.

“Interestingly, the central bankers in attendance don’t seem to be bothered by the depreciation of the yen, or the 5 per cent drop in the Aussie’s value over the past couple of weeks.”

Commodities

Iron ore has tumbled through $US80 a tonne to its lowest price since September 17, 2009, amid concerns China won’t take further action to bolster its economy. The benchmark iron ore price for immediate delivery at the port of Tianjin in China slid 2.3 per cent to $US79.80 a tonne on Monday, following a 1.6 per cent fall to $US81.70 on Friday.

■ Base metal prices were lower on Monday, falling up to 4.2 per cent, led by nickel. But aluminium prices were unchanged.

■ Gold prices edged above nine month lows on Monday with the Comex gold futures quote higher by $US1.30 an ounce or 0.6 per cent to $US1217.90 per ounce.

■ Brent crude oil fell below $US97 a barrel, dropping for the third session in four, as sluggish demand and ample supplies outweighed expectations of a cut in oil output from the Organization of the Petroleum Exporting Countries. November Brent was off $US1.67 at $US96.72, while U.S. crude futures were down 85 cents at $US91.56.

■ Hedge funds have extended this year’s longest exit from bullish gold bets as slumping prices and investor outflows since June erased $US6.7 billion from the value of gold-backed exchange-traded funds.

■ Most analysts are predicting a rally in iron ore towards the end of 2014 as high cost producers begin to pull supply out of the market.
“Iron ore is going to continue to be under pressure, unless we see the Chinese government come out with a fresh stimulus package, which would benefit the housing market,” ANZ senior commodity analyst Daniel Hynes said.
“That’s where the focus has been and they’ve continued to keep credit conditions tight in that sector, demand has been subdued, and as a consequence steel producers have been reluctant to restock any of their iron ore inventory in light of that fragile outlook.”

United States

US stocks were lower in early afternoon trade on Monday after China’s finance minister indicated the country will not increase stimulus measures and US housing data fell short of expectations.

The Dow Jones industrial average fell 79.6 points, or 0.46 per cent, to 17,200.14, the S&P 500 lost 15.34 points, or 0.76 percent, to 1,995.06 and the Nasdaq Composite dropped 59.73 points, or 1.3 per cent, to 4,520.06.

Europe

Europe’s main stock markets fell, with London dragged down by losses to heavyweight mining shares and a fresh profit warning from supermarket group Tesco, Britain’s biggest retailer. London’s benchmark FTSE 100 index dropped 0.94 per cent to 6773.63 points and in Paris the CAC 40 slid 0.42 per cent to 4442.55. Frankfurt’s DAX 30 index had initially been lifted by the announcement that Merck KGaA is to buy US specialty chemicals firm Sigma-Aldrich for €13.1 billion, but closed down 0.51 per cent at 9749.54 points.

Tesco cut its profit forecast for the third time in two months and suspended its UK boss with three other executives after finding a major fault in its accounts. Its shares fell nearly 13 per cent at one point on Monday after Tesco said it had called in its lawyers and new accountants to investigate the error in its UK food business that forced it to cut its first-half profit outlook by £250 million. A profit warning on August 29, three days before its new chief executive Dave Lewis joined, had overstated expected first half profit by 23 percent, it said.

Asia

Tokyo stocks closed 0.71 per cent lower after ending last week at a seven-year high, as telecoms giant SoftBank tumbled despite saying it had made billions from the US listing of Alibaba. The Nikkei 225 index at the Tokyo Stock Exchange – which on Friday closed at its highest level since November 2007 – fell 115.27 points to 16,205.90. The Topix index of all first-section shares was down 0.08 per cent, or 1.03 points, at 1330.88.

South Korea’s Kospi index declined 0.7 per cent and Singapore’s Straits Times Index lost 0.3 per cent.

What happened yesterday

The SPI was down 5 points on Tuesday morning with the Australian sharemarket a whisker away from completely annihilating this year’s gains, after investors on Monday hit the sell button, driven by worries of a weaker growth outlook in China.

Banks and miners both suffered hefty losses, extending the market’s plunge to more than 5 per cent over the past three weeks.

The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each dropped 1.3 per cent on Monday, to 5363 points and 5368.2 points respectively. Local shares were led lower after taking a flat lead from major global markets and softer commodity prices.

Wires