What you need2know:

• SPI futures down 38 pts at 5120.

• AUD at 86.95 US cents, 93.49 Japanese yen, 68.73 Euro cents and 54.07 British pence,

• On Wall St, S&P 500 -1.2%, Dow -0.7%, Nasdaq -2.3%

• In Europe, Euro Stoxx 50 -1.7%, FTSE -1.4%, CAC -1.6%, DAX -2.4%

• Spot gold down 0.1% to $US1223.16 an ounce on Friday in New York

• Iron ore adds 1.7% to $US80.24 (out of Qingdao)

• Brent oil up 0.2% to $US90.21 per barrel on Friday in New York

What’s on today

Australia lending finance, credit and debit card lending; China trade; IMF meetings; Japan, US, Canada holiday.

Stocks to watch

Coal and oil stocks are likely to be under pressure.

Deutsche Bank has a “buy” on Alumina and a target price of $2.25 a share.

The following stocks will trade ex dividend today: AMA Group, Magellan Flagship fund, Vealls Ltd, WAM Active, WAM Research.

Currencies

On Friday the US dollar index, which tracks the greenback against six major currencies, was up 0.44 per cent at 85.902. Against the euro, the dollar was up 0.61 per cent at $US1.2613. The dollar fell 0.1 per cent against the yen to 107.71 yen.

The European Central Bank will discuss this week whether to begin laying the groundwork to add the Chinese yuan to its foreign-currency reserves, according to two people with knowledge of the matter.

Central banks are most effective if they limit use of so-called forward guidance to when policy interest rates are as low as they can go, Bank of Canada governor Stephen Poloz said, suggesting he will avoid future explicit commitments.

Commodities

On the outlook for copper: "When there is fear in the market, it is difficult to find buyers and the price starts sliding, and this is what we are experiencing for copper,” said Naeem Aslam, chief market analyst at Ava Trade. Referring to caution about the approaching end of US monetary stimulus, Aslam added: “Taper tantrum, fragile European and Chinese growth and strength in the US dollar are the major reasons for the weak demand for copper.”

Many remain bearish about oil prices, in part because there has been little sign that the Organisation of the Petroleum Exporting Countries plans to cut production in the face of falling prices. On Friday, Saudi Arabia said it had boosted its oil production by 100,000 barrels per day (bpd) in September.

United States

The S&P 500 and Nasdaq on Friday posted their largest weekly declines since May 2012 and the Dow turned negative for the year, led down by technology stocks after a chipmaker warned of a major pullback in the industry

While gauges such as the S&P 500 cling to gains for the year, declines in individual stocks that exceed 10 per cent are spreading in the broader market. Doug Ramsey, the chief investment officer of Leuthold Group, said that when losses multiply in stocks away from benchmark indexes, it usually means the bigger companies are next. “We’re not expecting a bear market, but we are expecting a significant additional correction,” Ramsey said.

Coca-Cola Co shares are trading at record prices for the first time in more than 16 years as investors seeking safety in large, stable stocks disregard the company’s recent struggles.

Pacific Investment Management Co said its assets under management declined by $US97 billion last quarter, when co-founder Bill Gross left the firm.

Europe

European shares dropped sharply on Friday and Germany's stock market, one of the region's best performers since the 2008 financial crisis, fell to a one-year low as concerns mounted over the German and global economies.

The recent sell-off has prompted US-based investors to cut their exposure to Europe, according to data from Thomson Reuters Lipper that shows European equities suffering their biggest outflows in two months in the seven days to October 8. A Lipper poll of 109 US-domiciled funds invested in European stocks, which include exchange-traded funds' (ETFs) holdings, shows net outflows of $329 million, the biggest weekly redemptions since mid-August.

"I don't think there'll be a full-on meltdown, but I think we will be in a bearish market for the next few weeks," said Darren Courtney-Cook, head of trading at Central Markets Investment Management.

What happened on Friday

The benchmark S&P/ASX 200 Index posted its sharpest daily drop since June last year, tumbling 2 per cent to 5188.3 points. It was the biggest one-day fall since June 2013. The selloff extended the ASX’s losses for the week to 2.4 per cent.

The market has plunged 2.7 per cent so far this month and is now down 7.8 per cent since the start of September.