Another weak start later today for the ASX after Friday saw the second day of selling on financial and commodity markets (but not gold and oil) by worried investors.
In fact Wall Street suffered its biggest weekly drop since in more than two years, with the Dow closing in correction territory on Friday as investors weighed the possibility of a global trade war breaking out, a sell off in tech stocks, led by Facebook and Alphabet, rising US interest rates and yet more uncertainty at the Donald Trump White House.
And while markets managed to avoid one nasty problem on Friday with President Donald Trump signing a $US1.3 trillion spending bill on Friday afternoon that averted a government shutdown, that was only after he had threatened via Twitter earlier to veto it
That confusion was triggered by Trump to try and overshadow the TV appearance on Thursday night of yet another woman who says she had an affair with the Trump before he became President.
But it was the trade war concerns that again hurt market sentiment, as well Facebook’s growing woes (See separate story).
The signing of the spending bill did little to prop up stocks though, with the fall accelerating in the final hour of the day’s session.
Eurozone shares fell 1.2% on Friday and the US S&P 500 fell 2.1% as worries about a trade war, China slowing US bond buying, whether John Bolton’s appointment to Trump’s team as National Security Adviser will increases the risk of sanctions on Iran and a possible increased tensions in the Middle East.
As a result of the weak global lead ASX 200 futures fell 51 points or 0.9% pointing to a weak start to trade for the Australian share market on Monday after a loss last week.
Over the week US shares lost 5.9%, Eurozone shares fell 3.4%, Japanese shares fell 4.9% (not helped by a rising Yen), Chinese shares lost 3.7% (most of that on Friday) and Australian shares fell 2.2% (with most of that on Friday’s 2% or 119 point plunge)
According to the AMP’s Chief Economist, Dr Shane Oliver the big falls on Thursday and Friday have dragged Wall Street into correction territory with the Dow down 10% from their January high), Chinese shares (down 11% from their January high) and Australian shares (down 5% from their January high – we never had the big run up that other markets have had in 2018).
Eurozone shares (down 9% from their January high) and Japanese shares (down 15% from their January high) have seen bigger falls with domestic factors playing a part as well as the trade war fears and issues like North Korea.
Oil and gold though rose strongly on Friday and last week (See separate stories) and US bond yields are back to 2.818%, 10 points or more under the highs of February as nervy investors bail out of shares, commodities and junk bonds and head for the security of US Treasuries.
Looking at Wall Street, The S&P 500 closed 2.1% to its lowest level since February 8. The 6% decline for the week was its biggest since the first week of January 2016, when markets were battered by fears over Chinese economic growth.
The Dow dropped 1.8% to its lowest level since late November and for the week it shed 5.7%, also the worst week since January 2016. The Dow’s close of 23,533.2 puts it back in correction territory.
The Dow previously suffered a correction on February 8, pulling back from its record high on January 26, and is now down 11.6% from that peak. The Nasdaq Composite finished 2.4% lower and shed 6.5% for the week.
The S&P 500 is now down 9.9% from its January record high, while the Nasdaq is down 7.9% from its peak earlier this month.
The dollar index, a measure of the US currency against a weighted basket of global peers, shed 0.9% last week, in its first and biggest weekly decline since mid-February. On Friday, the dollar was down 0.5% at 89.41, its lowest since February 19.
But the Aussie dollar hasn’t gained and closed at around 77 US cents Saturday morning, close to its lows for the year (It hit 76.88 during trading).
