On 08 February, 2016 – Stocks continue selloff
European and US indices tumbled again Monday on a combination of sliding oil prices and concerns regarding global growth. Most Asian markets were closed for the Lunar New Year.
United States
Markets were sharply lower Monday weighed down by steep losses in technology, financial and energy stocks. The slide followed sharp drops in Europe and set the market on course for its second big loss in a row. Crude oil prices slumped again. However, a late rally in energy shares left the market well off its lows of the day. The Dow Jones industrials were down 1.1 percent, the S&P retreated 1.4 percent and the Nasdaq lost 1.8 percent.
Several factors have investors in a selling mood this year, including falling crude oil prices and the economic slowdown in China and elsewhere. Traders will be monitoring several big company earnings this week to see what management teams say about their prospects for future earnings. Shares of Credit Suisse slid on news that its new chief executive had asked for his bonus to be cut after a report of a huge fourth quarter loss and plans for 4,000 job cuts. Cognizant Technology Solutions sank after it forecast earnings and revenue that were well below what was expected.
Harman International Industries declined on news that a former executive at Harman has been charged with insider trading by federal prosecutors. Apollo Education Group soared after it agreed to be acquired by a consortium led by the investment firm Vistria Group. The firm aims to take Apollo Education, the for-profit college operator, private. Goldman Sachs Group and Morgan Stanley declined. Chesapeake Energy tumbled after the natural-gas producer said it “has no plans to pursue bankruptcy” after reports intensified such fears. Amazon.com, Facebook and Alphabet slid.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$42.90 to US$1,193.25. Copper futures were down 0.6 percent to US$2.09. WTI spot crude was down 79 US cents to US$30.10. Dated Brent spot crude was down 98 US cents to US$33.08. The US dollar was up against the pound and the Canadian dollar. However, it declined against the euro, yen, Swiss franc and the Australian dollar. The Dollar Index was down 0.5 percent. The yields on US Treasury 30 year bond and 10 year note were down 10 basis points to 2.57 percent and 1.74 percent respectively.
Europe
Stocks dropped across the board Monday. Weakness in crude oil prices and continued weakness in Eurozone investor sentiment weighed on the markets. Concerns over slowing global growth and uncertainty over the Federal Reserve’s monetary policy prior to Fed Chair Janet Yellen’s Congressional testimony also contributed to the pullback. The FTSE declined 2.7 percent, the CAC retreated 3.2 percent, the DAX dropped 3.3 percent and the SMI lost 2.5 percent.
Traders said concerns over bank margins in a negative interest rate environment were hurting the bank sector after central banks in Europe and Japan delivered dovish messages in January. Worries over a possible British vote to leave the European Union later this year were also weighing.
Both energy stocks and financial stocks were under intense pressure Monday. Meanwhile, gold stocks were among the best performing stocks, as investors vacated riskier investments in favor of safe havens. Commerzbank, Deutsche Bank, Société Générale, BNP Paribas and Crédit Agricole finished lower. RWE and E.ON were down. ThyssenKrupp and Salzgitter declined. In Paris, Air France KLM dropped after reporting passenger traffic figures for January.
Orange weakened after Millicom International Cellular announced an agreement for the sale of its Tigo business in the Democratic Republic of Congo to the company. Technip and Total closed down. In London, insurer Old Mutual dropped after announcing sale of Rogge Global Partners to Allianz Global Investors. Tullow Oil, BP and Royal Dutch Shell finished lower. Randgold Resources surged as gold prices climbed sharply. Fresnillo also advanced
Emerging market exposed lender HSBC dropped to its lowest level since 2009 while Barclays dropped to its lowest level since 2012. Shares in Barclays were briefly suspended following volatility in its share price over the course of the session in London from its level following the opening auction.
Asia Pacific
With most markets closed for the Lunar New Year markets were quiet and mixed. Markets in China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore and Taiwan were closed for the Lunar New Year holidays. Markets in mainland China and Taiwan are closed all week while Hong Kong markets are closed for three days. The All Ordinaries slipped 0.1 percent while the S&P/ASX was virtually unchanged. The Sensex dropped 1.3 percent while the Nikkei added 1.1 percent. Investors reacted to the US employment report for the first time. They pondered about US interest rates going forward given contradictory signals from the report. While employment increased less than expected, unemployment, wages and hours were all better than expected. Investors also were looking forward to two days of Congressional testimony by Federal Reserve Chair Janet Yellen.
Japanese shares snapped a four day losing streak after the dollar rose above 117 yen in local trading and data showed Japan posted an 18th consecutive current account surplus, boosted by a plunge in crude oil imports and a record travel surplus. Banks Mitsubishi UFJ Financial, Mizuho Financial Group and Sumitomo Mitsui Financial ended largely unchanged after falling sharply in early trading on concerns that the Bank of Japan’s introduction of negative interest rates will poison their business model. Toyota Motor retreated after posting a lower than expected operating profit for the third quarter. Honda Motor and Nissan Motor advanced. Advantest, Fanuc and Hitachi Construction Machinery were higher on the day.
In Australia, the big four banks retreated as investors braced for earnings and ANZ refused to comment on a report that it will face legal action by the corporate watchdog over alleged interest rate rigging. BHP Billiton, Rio Tinto, Santos and Woodside Petroleum were up. Gold miner Newcrest Mining jumped as spot gold prices traded near a three-month high.
Indian shares succumbed to a late sell-off on Monday after oil gave up early gains. Investors awaited the official GDP data for the fourth quarter even as doubts persisted over the new GDP growth rate methodology. Fourth quarter GDP was up 7.3 percent from a year ago after gaining a revised 7.7 percent in the third quarter.
Global Stock Markets
Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Germany posts December industrial production and merchandise trade balance. The UK also releases December merchandise trade. In the US, December JOLTS and wholesale trade will be reported.
*Note — all releases are listed in local time.