Another miserable night on markets offshore – with shares in Europe and the US closing lower in mixed and dirty trading. And we can blame giant US retailer Wal-Mart Stores which stunned investors with a big earnings and sales downgrade.
The overnight ASX futures market is showing the first positive start to trading for the local market for this week well past 7am with a gain of around 4 points indicated. But that disappeared and the market looks like closing flat to a touch lower for the fourth morning in a row this week.
The optimism was maintained for most of the session and seems to have been linked to the late rally on the ASX yesterday than what happened after the close in markets in Europe and America.
The US dollar lost ground against all major currencies and the Aussie currency traded over 73 US cent, again in early Asian dealings this morning.
Gold rose to a four month closing high around $US1.187 and oil ended all but steady at just over$US46 a barrel.
Wall Street was whacked by the shock sales and earnings downgrade from Wal-Mart Stores, the world’s biggest retailer. It now sees flat sales this year instead of a small rise, and is looking at lower sales and earnings from the 2017 year for a couple of years.
The reason – higher investment in ecommerce to fight Amazon and other online retailers, higher wages. Not even a $US20 billion share buyback over the next two years helped offset the slide.
The Dow lost 0.9%, the S&P 500 shed 0.5% and the Nasdaq lost 0.3%.
Wal-Mart shares fell by 10% at the close, cutting $US21 billion from its market cap and knocking 40 points from the Dow and helping drag the S&P 500 sharply lower. It was the biggest one day fall for Wal-Mart since 1988, according to Bloomberg data.
Wal-Mart’s fall dragged other retailers lower and cast doubt on US growth, according to analysts. Weak Chinese inflation for September didn’t help (although producer prices remained in deep deflation and is the bigger continuing problem).
US sentiment was not helped by a surprisingly weak report fron Netflix with subscriber growth under forecasts the shares fell by up to 11% in after hours trading.
US bond yields fell to five month lows as investors pushed back the chances of a rate rise from the Fed – evidence of a growing split on the Fed, with more senior officials calling for an increase to be delayed this week helped change opinion.
