This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/2018/nov/21/australian-stock-market-two-year-low-tech-energy-wall-street-ftse-dollar-us-uk

The article has changed 7 times. There is an RSS feed of changes available.

Version 2 Version 3
Australian shares dive to two-year low on tech and energy sell-off US-China trade war could accelerate global downturn, say economists
(about 2 hours later)
The Australian share market has dived to near two-year lows amid a global stock sell-off and fresh signs that the local economy is struggling. The US-China trade standoff will continue to weaken confidence in the global economy into next year, economists have warned, as the increasingly gloomy outlook for growth dragged on share markets across the world.
The benchmark S&P/ASX200 index hit a new 21-month low 5,594 points on Wednesday morning – a fall of more than 1.2%. Plunging oil prices and intensifying concerns about technology stocks in the US spread contagion to Asia Pacific markets on Wednesday after renewed losses on Wall Street.
But it later bounced back in afternoon trade to stand down 0.4%. Stocks across the rest of Asia Pacific had also followed US markets lower with Tokyo and Seoul both off more than 1% in the morning before also paring losses. But as the broad losses in Wall Street pulled its key indices into the red for this year, economists at JP Morgan warned that the trade dispute between the world’s two biggest economies threatens more trouble ahead.
The Aussie dollar had slipped to US72.14c overnight but recovered to US72.37c. “We forecast that the US imposes an additional 25% tariff on virtually all goods imports from China early next year. This will drag materially on activity in China and could accelerate the decline in global business confidence now underway,” the JP Morgan team wrote in a note to clients.
Plummeting oil prices – weakened by wider uncertainty in global shares – had hurt Australian energy stocks, with the sector dropping by more than 3% early on. Although they forecast that the Chinese authorities will throw more policy stimulus to offset a hit from the tariffs and keep GDP growth at 6%, the team predicted that markets must prepare for the Federal Reserve to raise borrowing costs another four times next year.
The prospect of more rate hikes will set alarms bells ringing in emerging markets, which have already been squeezed of liquidity by the rise of the US dollar over the past few months.
Stocks from Sydney to Shanghai were in the red on Wednesday afternoon, although they had pared earlier, heavier losses. The Nikkei in Tokyo was off 0.3% while the Australian benchmark index dropped 1.2% in the morning to a fresh 21-month low.
Oil prices, which dropped 6% on Tuesday, pushed energy stocks lower as investors fretted about weaker global growth and specualtion about the end of the tech stock boom. Brent crude was up 1.2% in early trade on Wednesday.
Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, told Reuters: “It is difficult to pinpoint a single factor driving the global risk aversion. Apple and trade tensions seem to be touted as factors every other day, but it is difficult to blame them for all the woes.
“The markets appear to be starting to prepare for a loss of momentum in the global economy, although it is doing quite well at the moment.”
Plummeting oil prices – weakened by wider uncertainty in global shares – had hurt Australian energy stocks, with the sector dropping by more than 3% early on. The Aussie dollar had slipped to US72.14c overnight but recovered to US72.37c.
The ASX200 hasn't been spared from this cycle. The index fell with far greater force than was anticipated during yesterday's, as the broad-based evacuation from equities persisted. Read on https://t.co/oNt19tfjcU @KyleR_IGThe ASX200 hasn't been spared from this cycle. The index fell with far greater force than was anticipated during yesterday's, as the broad-based evacuation from equities persisted. Read on https://t.co/oNt19tfjcU @KyleR_IG
Falling energy shares also contributed to Wall Street’s overnight slump, where trade tensions and a sell-off in technology stocks caused havoc.
The Dow Jones industrial average was down 555 points, or 2.2%, and the tech-heavy Nasdaq was off 1.7%. The leading tech companies have now lost a combined $1trn in value since their year highs.
The falls come as two closely watched indicators survey pointed to trouble ahead for the Australian economy.The falls come as two closely watched indicators survey pointed to trouble ahead for the Australian economy.
The Westpac–Melbourne Institute leadingindex, which indicates the likely pace of economic activity three to nine months into the future, fell from 0.41% in September to just 0.08% in October.The Westpac–Melbourne Institute leadingindex, which indicates the likely pace of economic activity three to nine months into the future, fell from 0.41% in September to just 0.08% in October.
Westpac’s chief economist, Bill Evans, said: “With this latest slowdown, the index growth rate continues to point to slowing momentum into the new year.Westpac’s chief economist, Bill Evans, said: “With this latest slowdown, the index growth rate continues to point to slowing momentum into the new year.
He blamed weak wages growth, falling property prices in Sydney and Melbourne and a very low savings rate for the poor outlook for consumer spending.He blamed weak wages growth, falling property prices in Sydney and Melbourne and a very low savings rate for the poor outlook for consumer spending.
In addition, the NAB monthly cashless retail sales index published on Wednesday said data mapping suggested that the official Australia Bureau of Statistics measure of retail sales would grow at a worse-than-expected 0.2% month-on-month in October.In addition, the NAB monthly cashless retail sales index published on Wednesday said data mapping suggested that the official Australia Bureau of Statistics measure of retail sales would grow at a worse-than-expected 0.2% month-on-month in October.
NAB cashless retail sales points to a 0.2% increase in the ABS official measure for October. Spending is particularly weak in NSW, but not VIC. Australia's retail sales slowdown looks like it's becoming entrenched (via @BIAUS) https://t.co/XLQLktcdb6 pic.twitter.com/UTe6qVjzLU The big four banks were all down, with the losses led by ANZ, which posted a 0.77% drop to $25.105. Commonwealth Bank, whose chair, Catherine Livingstone, was on the stand at the banking royal commission on Wednesday morning, fell 0.6%. Tech shares continued to fall, losing more than 2.8% early, with telco stocks also down.
Heavyweight materials stocks weighed significantly at Wednesday’s open in Sydney after metal prices took another hit overnight. BHP, the country’s second biggest company by market value, fell 2.57% to $31.85 and Rio Tinto was down 2.55% to $77.84.
Fortescue Metals, BlueScope Steel and South32 were down as the price of iron ore continued to fall.
Healthcare was the only bright spot for the bourse after the sector giant CSL jumped 0.89% to $177.32, and Sonic Healthcare also lifted on a stronger earnings report.
The big four banks were all down, with the losses led by ANZ, which posted a 0.77% drop to $25.105. Commonwealth Bank, whose chair, Catherine Livingstone, was on the stand at the banking royal commission on Wednesday morning, fell 0.6%.
Tech shares continued to fall, losing more than 2.8% early, with telco stocks also down.
Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, told Reuters: “It is difficult to pinpoint a single factor driving the global risk aversion. Apple and trade tensions seem to be touted as factors every other day, but it is difficult to blame them for all the woes.
“The markets appear to be starting to prepare for a loss of momentum in the global economy, although it is doing quite well at the moment.”
Australian Associated Press and Reuters contributed to this report.Australian Associated Press and Reuters contributed to this report.
Stock marketsStock markets
Australian economyAustralian economy
US economyUS economy
Business (Australia)Business (Australia)
newsnews
Share on FacebookShare on Facebook
Share on TwitterShare on Twitter
Share via EmailShare via Email
Share on LinkedInShare on LinkedIn
Share on PinterestShare on Pinterest
Share on Google+Share on Google+
Share on WhatsAppShare on WhatsApp
Share on MessengerShare on Messenger
Reuse this contentReuse this content