MH17 crash and Gaza tension cause markets to panic
The early news that a Malaysian passenger plane had crashed near the Ukraine-Russia border triggered a wave of risk aversion.
Other geopolitical tensions in the Gaza strip were also in the background, while weak US housing data probably also added to investor concerns.
The Dow closed 0.9% lower and the S&P500 fell 1.2%.
US treasuries rose (yields fell) on safe haven demand as the news developed that a Malaysian plane had been shot down.
The safety bid should translate into lower yields in the Australian market today. Yields (implied by futures) on 3-year bonds fell 5 basis points to 2.50% while yields on 10-year bonds fell 7 basis points to 3.34%.
Weaker sentiment saw the Japanese yen outperform in currency markets, strengthening against the US dollar and AUD.
Against a basket of currencies, the US dollar spiked higher at one stage, but then retreated to be relatively unchanged.
The Australian dollar came under pressure early this morning, as developments on overnight events became clearer. AUD is currently trading around 93.5 US cents.
Gold and oil prices jumped on the escalating geopolitical risks. Gold prices have lifted to above US$1300 an ounce. Prices of other commodities, such as copper, fell on weaker risk appetite.
The May Conference Board leading indicator Index rose 0.2% to 129.7, reversing April's 0.2% fall.
According to the NAB Quarterly Business Survey, business confidence declined in Q2, down to 6 from a revised 7 in Q1.
This slight decline indicates that businesses remain relatively optimistic despite public pessimism concerning the Federal Budget. Resilience in confidence levels provides a positive sign for business investment and jobs.
Euro zone CPI was unrevised at 0.5% in the year to June, while the core was unrevised at an annual pace of 0.8%.
Construction output fell 1.5% in May, retreating after a boost earlier in the year.
The annual pace of growth stepped down from 7.4% in April to 3.5% in May, but remains an improvement from the annual declines recorded in 2013.
New Zealand job ads increased by 5.7% in June, according to ANZ, reaching the highest level since October 2008.
The ANZ-Roy Morgan Consumer Confidence Index rose 0.6% to 132.7 in July.
New Zealand consumers are likely optimistic given New Zealand's solid economy, in spite of interest rate hikes by the RBNZ.
US housing starts fell 9.3% in June to a nine-month low, and followed a 7.3% decline in the previous month.
The back-to-back decline is a setback in residential housing construction, and reflects Yellen's recent comments that progress in the housing market has been "disappointing."
A lift in mortgage rates from record lows and supply shortages have been blamed for the uneven recovery. Building permits also weakened, falling 4.2% in June.
Other data from the US suggested more positive signs for manufacturing and the jobs market. The Philadelphia Fed factory index surged from 17.8 to 23.9 in July, its third highest reading in nine years.
Meanwhile, US initial jobless claims fell 3k to 302k for the week ending 12 July, which took the four-week average to its lowest in seven years.