While our market will be trading softly today after another red-in stained day in Asia, Europe and the US on Tuesday, continue to watch what happens in the Chinese markets because more and more analysts think the uncertainty there is knocking other regions.
Tonight Microsoft, another of the megatechs reports – its results will be influential. And on Thursday night its a big session with Amazon, Alphabet (Google), Snap, Twitter and Intel all reporting quarterly figures which will show us where the US market is heading.
Driving those concerns about China are fears that a slowdown by China’s economy will eventually ripple through the rest of the world.
And helping drive that slowdown in coming quarters will be Donald Trump’s trade war with China which is already hurting leading US companies, such as Caterpillar which lifted third quarter profits to a record $1.7 billion, but revealed higher steel and other costs.
Caterpillar shares slumped 7.6%, a susprise because the results were so solid (that $US1.7 billion in earnings was up 50% from the $US1.1 billion a year ago.
But it was the lackof forward guidance the gloomy commentary on rising costs and transport woes that did for the stock in the eyes of investors – and China was one of the big factors because Caterpillar is a major player in that country’s economy.
On top of this is the impact of the higher dollar (being driven by the US Federal Reserve’s tightening policy) which is having a definite impact on exports across the board, pricing then out of markets or forcing US exporters to cut their sdelling prices.
Tuesday saw the Down lose more than 100 points, or 0.5%, but had been off by as many as 548 points earlier in the session, with the Nasdaq and the S&P 500 index both suffering a bruising opening slide before paring losses ahead of the close.
After Tuesday, the S&P 500 is still up 2.5% for the year to date, but it has fallen nearly 7% from the record high it hit in September. The Nasdaq Composite has faced a steeper 8.7% fall from its late August peak. The ASX 200 is now down 3.6% year to date and more than 5% in the last month.
That was after European markets fell by more than 1% (over 2% in Italy where the nationalist government is heading for a brawl with the EU over its budget). The EuroStoxx 600 index fell nearly 1.6% on Tuesday and is now down nearly 8% for the last month and over 9% for the year so far.
Earlier the Chinese markets ended two days of gains and the Shanghai Composite returned to the losses of the past couple of weeks, sliding 2.3%, while the Shenzhen Composite Index closed 1.9% lower, halting a two-day rally that had been underpinned by market-supportive comments from Chinese officials.
Losses occurred elsewhere – in Tokyo the Nikkei 225 index tumbled 2.7% and the Hong Kong’s Hang Seng Index dropped 3.1%. The Aussie market trade down 1.1%. Overnight trading in ASX 200 futures saw the index down, then struggle back to break even by the close.
Investors will be taking their lead from What happens in China today.
Investors are being confronted with risks from across the globe. There’s slowing growth in China which is cooling and the government is trying to reverse that with more spending and easing rules on output, pollution and debt to halt the slide.
China is also moving deeper into the trade row with the US that has damaged sentiment in other major economies, such as Germany, Australia, and Canada.
In Europe, the UK and EU have been stuck in a deadlock in talks over Brexit — something that has weighed on business sentiment.
Italy’s budget row with the EU has ignited fresh tensions in the country’s bond market and presented another potential hazard for global investors.
