Yahoo Finance Red October: Investors on edge as global markets slide
With three stock market sessions left in October, you have to go back to the same period in 2008 – in the midst of the global financial crisis – to find a monthly drop as severe.
Australian shares were poised to slip at the open and extend what is currently the local market’s worst month in ten years.Healthcare and mining stocks are strong performers at noon.
However, the market defied early predictions of doom and gloom to climb at the start of a new trading week, with the benchmark S&P/ASX200 index up 41 points, or 0.72 per cent, to 5706.2 at 1200 AEDT on Monday, while the broader All Ordinaries is up 34.8 points, or 0.6 per cent, at 5794.4.
The Australian dollar cooled slightly, and is buying 70.87 US cents from an earlier high of 71.02 US cents at noon.
Healthcare shares were bright green thanks to a 3.84 per cent jump by giant CSL, while ResMed Inc was also ahead by more than 2.8 per cent after reporting strong year-on-year revenue growth.
The big miners also enjoyed early gains, following a rise in iron ore prices, with Rio Tinto ahead 1.07 per cent to $74.95 and BHP rising 1.04 per cent to $31.525.
BlueScope Steel was up 1.29 per cent, while Fortescue Metals rose 1.7 per cent and South32 also climbed.
US stocks: Tech stocks hammered
All early signs pointed to another slide for the local bourse at the open.
Grim results from Amazon.com and Google-parent Alphabet on Friday, two stocks that have helped power the equity markets decade-long bull run, sparked the Friday’s sell-off
The S&P 500 ended at its lowest level since early May, capping a volatile week that confirmed a correction for the Nasdaq.
The benchmark S&P 500 itself flirted with correction territory – when an index closes 10 per cent or more below its all-time closing high – but recovered to end off that level.
“It’s all been driven off quarter reporting,” said Ernesto Ramos, portfolio manager for BMO Global Asset Management in Chicago.
“When the reports are bad in technology you get a really bad day because of the elevated valuations.”
Investors may see more volatility through the remainder of the US earnings season and ahead of the November 6 US midterm congressional elections, he and other money managers said.
“Once the elections and earnings are out of the way, we’ll have a calmer market but not necessarily a big move up,” Ramos said.
Alphabet’s revenue missed estimates, fanning concerns that regulatory scrutiny and competition would throttle its scorching pace of growth. The stock fell as much as 5.6 per cent before recovering to end down just 1.8 per cent.
Amazon tumbled 7.8 per cent in its worst daily percentage drop since October 2014, after it missed quarterly sales estimates and gave a below par holiday-season sales forecast.
The Dow Jones Industrial Average fell 296.24 points, or 1.19 per cent, the S&P 500 lost 1.73 per cent, to 2,658.69 and the Nasdaq Composite dropped 2.07 per cent.
The S&P 500 finished at its lowest level since May 3. The Nasdaq fell 3.8 per cent for the week, its biggest weekly drop since March 23, while the Dow was down 3 per cent and the S&P 500 was down 4 per cent on the week.
While economic growth is mostly healthy, disappointing corporate results and forecasts this earnings season have shown how tariffs, rising wages and borrowing costs as well as jitters over geopolitical events are hurting companies.
The Aussie Dollar
The Australian dollar has been hammered as risk sentiment took a knock following the steep losses in US stock futures and weakness in the Chinese yuan.
The currency is edging closer to falling under 70.00, which hasn’t been breached since February 2016.
The Aussie was buying 70.25 at 1630 AEDT on Friday but lifted to 70.91 US cents on Monday.
Key economic data this week
Q3 inflation data will is released on Wednesday. The median forecast is for inflation to rise by 0.5% q/q, leaving annual growth at 1.9%.
Monthly retail sales data for September is out on Friday. The median forecast is for sales to increase by 0.3%.
September building approvals data is out on Tuesday, after a sharp fall in August which indicated the slowdown in residential construction.
CoreLogic will release summary of house price movements for October on Wednesday.
RBA releases private sector credit data on Wednesday
ABS releases Australia’s September trade balance on Thursday
— Yahoo Finance and AAP
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