Stock Market Analysis: Biggest Selloff In Months Around The Globe …
* US stock markets finished sharply lower for the session, as weaker corporate earnings continued to weigh and geopolitics overwhelmed the bulls, after corporates said sanctions will hit their bottom line.
* European stock markets slumped overnight, as the ramification of stricter Russian sanctions were of concern and earnings disappointed.
* Asian stock markets fell yesterday, backing off six years highs, but the Chinese market held at seven month highs and the Hong Kong went parabolic. Expect weakness across the region today.
* Commodities prices fell. Gold prices fell to $US1,282, while crude-oil fell to $US98. Copper edged lower to US3.231c.
The Australian sharemarket has closed the month sharply higher in July, with the ASX200 up 4.4% at 5633, closing above the key 5600 level for the second time in six and a half years the highest since June 2008, ahead of the earnings season. This is the best monthly performance since June last year, fuelled by the mining sector up 7%, aided by a rebound in China (see chart below).
Yield traders were active again, steel stocks rose while the miners saw some profit taking. We are leading up into a strong period for the Aussie market, which has risen 80% of the time in the past decade and this strength generally holds through to mid- September.
Overnight global markets have sold off due to the ongoing weaker corporate earnings reports in the US and Europe and the realisation that the stricter Russian sanctions will impact company profits and global growth going forward.
The SPI 200 futures are down -1.0% to 5516, giving a negative lead for the ASX market today, as the US and EU markets sold down. The 5580 level will be key for the ASX200 today. The Australian dollar fell to US92.9c.
The Chinese market has risen for the past four weeks. Official PMI data out today.
US Markets
US stock markets finished sharply lower for the session, as weaker corporate earnings continued to weigh and geopolitics overwhelmed the bulls, after corporates said sanctions will hit their bottom line.
The three benchmark indexes down -2% for the session. All ten S&P500 sectors finished in the red, led by falls in the Energy sector slumped -2.1%, but all sectors finished down over -1.8%. The VIX jumped 27% to 16.9 overnight.
The Dow Jones index fell to two month lows, with all 30 stocks in the red. The markets had their first monthly fall in six months, the Dow Jones fell -1.5% in July. The Dow Transport Index has fallen -4.2% in the past week and the Russell 200 was down -2.3% overnight and s now down -2.3% for the year. The S&P500 retreated from record levels and has now pared its gains for the year to 4.5%, while the Dow Jones has given up its yearly gains.
The correction they had to have – the US markets are on their third longest winning streak in 25 years, going over 1000 days without a -10% correction (since 2011) and have not experienced a sell off of more than -7% for a year and a half. The Nasdaq 100 index is vulnerable, as only four companies make up 35% of the index, Apple, Google, Intel and Microsoft.
The US earnings seasons continues with 50 S&P500 stocks reporting overnight. Exxon, Samsung, Nike, Sprint and Micron shares all fell after reporting worse than expected. Of the S&P500 companies that have reported 79% have beaten on profits, 65% beat on revenues, while 66% beat sales forecast. Companies have reported second quarter profits have risen 11%, the fastest growth rate in three years. Analysts expect S&P500 stocks to report profits up 45%, earnings rose 6.2% and sales up 3.3% in the June quarter, according to Bloomberg.
The S&P Ratings agency has declared Argentina is now in a state of selective default, after the US markets had closed. The monthly NFP employment report is due on Friday, where there needs to be 270,000 jobs created to support the current run in the equities market.
For the session Dow Jones closed down -1.9% at 16,563, the S&P500 closed down -2.0% at 1,930 and the NASDAQ closed down -2.1% at 4,369, while on 10-year rose to 2.56%.
European Markets
European stock markets slumped overnight, as the ramification of stricter Russian sanctions were of concern and earnings disappointed.
The Stoxx Europe 600 Index closed down -1.3% for the session, its worst session for three weeks. Trading volumes jumped to 25% above the monthly average. Banco Espirito Santo plummeted over -40% after the Portuguese lender was ordered to raise capital after it reported a $US4.8 billion loss. Sellers continue to outweigh buyers as the EU imposed sanctions on Russia to restrict access to the capital markets. Geopolitical tensions continued to simmer, with the continuing violence in Ukraine and the Gaza Strip.
The London markets fell overnight, as traders focused on earnings, Shell beat estimates, but Adidas and Alcatel slumped after disappointing. The German market slumped on concerns of geopolitics and caution over the impacts of the EU limits Russia’s access to capital markets. In earnings of the Stoxx Europe 600 that have reported 57% beat on profits and 51% beat on sales, according Bloomberg.
For the session the German DAX 30 closed down -1.9% at 9,407, the UK the FTSE 100 closed down -0.6% at 6,730, the French CAC 40 closed down -1.5% at 4,312, while the Spanish market closed down -2.1% at 10,707.
Asian Markets
Asian stock markets fell yesterday, backing off six years highs, but the Chinese market held at seven month highs and the Hong Kong went parabolic. Expect weakness across the region today.
The MSCI Asia Pacific Index was down -0.4%, but finished up 2.6% for the month, holding at its highest levels in six years. Across the region the Tech sector weighed after Samsung and Nintendo disappointed. In earnings of the corporates that have reported on the MSCI Asia Pacific Index since the start of July, 56% have beat on earnings.
The Chinese market resumed its eight session winning streak, the longest winning streak in a year and is at its highest levels in seven months. The corporate earnings continues until the end of August. Chinese PMI and CPI figures are due out today and will give a firmer read on the consumer and manufacturing.
The Hong Kong markets finished higher again up to its highest level since mid-November 2010 and has entered into bull market territory after rising 20% from its March lows, but this market has gone parabolic and is vulnerable. The Japanese market recovered for a fourth session and is trading at six month highs, on the back of the weaker yen and as investors digest corporate earnings, in the first quarter since sales tax was raised back in April.
For the session the Shenzhen Composite rose 1.2% at 2,350, the Hong Kong Hang Seng closed up 0.1% at 24,756, and the Japanese Nikkei closed down -0.2% at 15,620, while the South Korean KOSPI closed down -0.3% at 2,076.
Commodities
The Dollar Index edged higher to 81.45 (its highest level for a year) on a lower Euro, and the Aussie Dollar fell to US92.9c, edging back from its highest level since November. Commodities prices fell.
Overnight the NYMEX WTI Crude delivery down -0.2% at $US98.20, the COMEX Copper closed down -0.3% to 3.231, the COMEX Gold closed down -1.1% at $US1,282.80.
ASX News
ERA – Energy Resources of Australia has reported a 1H14 net loss as the uranium price hovers around nine year lows amid weak demand.
LYC – Lynas Corporation slumped -17%, with investors disappointed by a fall in prices and the troubled rare earths miner’s persistent cash flow problems.
NST – Northern Star the gold miner has easily beaten its quarterly production target following a string of acquisitions.
OGC – OceanaGold, which operates the goldfields in Otago and Buller, has posted a 1H14 profit as its Didipio operation in the Philippines helped raise first-quarter earnings to a record.
ORG – Origin Energy has increased quarterly production by 8% due to higher seasonal demand and higher production from its Australian Pacific LNG project.
SHL – Sonic Healthcare will partner with leading London hospitals to establish a state of the art pathology and analytics service for the UK’s National Health Service.
WPL – Woodside’s $US2.6Bn deal to buyout Shell is in doubt as a large number of investors oppose the proposal.
Market Summary
ASX – to open lower
US & UK/Europe – sharply lower
ANZ -1.5%, NAB -1.1%, NWS -1.0%
AWC -1.9%, BHP -1.7%, RIO -1.8%, NEM -2.7%
By Michael Hevern D2MX Investment Advisor For trade ideas and recommendations on how to trade in this market, sign up for a free trial of the D2MX Daily Trading Report, call 1300 610 024 or email [email protected].
Tags: Asian Markets, ASX, ASX News, Business News, Commodities, Crude Oil, European Markets, Ex Dividend, gold price, Nasdaq, Stock Market Analysis, stockmarket, trading, US Market wrap
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Stock Market Analysis: Biggest Selloff In Months Around The Globe …
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