Market Update: What Factors Led to A Sell-Off in The US Markets

market update

The US markets have witnessed a strong sell-off on October 25, 2018 which are now impacting other markets. Dow Jones Industrial Average ended yesterday’s session at 24,583.42 indicating that the index has slipped 608.01 points or 2.41%. The markets might play the trick of cheering up the investors by showing some signs of improvement sometimes, but it would be at the discretion of the investors’ to whether or not fall into this trap. Broadly, it can be said that the markets have been very uncertain lately and this have been proved by yesterday’s sell-off. The technology stocks have also witnessed the substantial downtrend. The primary reasons which have been weighing on the investors’ sentiments are worries about the trade battle, rising interest rates as well as negative momentum in the Chinese economy.

However, investors have decided to deploy their investable capital in the debt products or safe-havens. This could be the primary reason which has led to the elevated prices of the bonds and thus reducing their yields. However, global market players are of the view that the apex bank might consider checking the pace of their interest rates as the US economy is expected to witness negative momentum in 2019 amid fading effects of the reduced taxes as well as higher government spending.

However, with the fall in the equity markets, the oil prices have also witnessed the impacts as on October 25, 2018, the oil prices have witnessed a decline. With the selling witnessed in the global equities, the tensions related to the demand growth of oil increased which negatively impacted the oil prices.

Amid Declining US Markets, Australian Markets Also Joins the League

With the significant fall in the US markets, the Australian markets have also decided to walk in the footsteps of the US stocks. S&P/ASX200 ended the session at 5664.1 which implies a fall of 164.9 points or 2.9%. This decline was witnessed primarily because of the downturn in the US markets. Moreover, there is no reason that the Australian markets should not witness a negative momentum as the upside drivers have been in questions of the market players lately.

The banking stocks are witnessing the impacts of the regulatory pressures as well as a slump in the housing markets. The healthcare stocks are struggling with their stretched valuations as well as lesser yields. The mining companies have been facing challenges because of the fluctuations being witnessed in the commodity prices because of the tensions in regard to trade disputes as well as global growth.

However, Lynas Corporation Limited (ASX: LYC) ended the session on a stronger note by closing at A$1.700 per share which implies that the stock rose A$0.115 per share or 7.256%. AMP Limited (ASX: AMP) ended the session at A$2.500 per share implying the fall of 24.471%. Casey Capital has made an announcement that it had acquired a stake in the Brookside Energy (ASX: BRK). For more information, click here. Cobalt Blue (ASX: COB) ended the session on a weaker note as the company believes that it would not be able to meet the deadline of the final feasibility report. For more information, please click here. The trade wars between the US and China could also impact the Australian economy and this was even stated by the International Monetary Fund or IMF.

The global economy is being impacted by the macroeconomic variables like geopolitical tensions amid the increasing concerns in regard to the tightening of the monetary policies. This tightening is being favoured by the policymakers to control the risks of higher inflation which would further help in witnessing the global growth.

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Kunal Sawhney
Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of Technology, Sydney. He has an extensive expertise in quantitative and qualitative stock selection practices, and he proficiently navigates on equity related matters while enabling them achieve success in complex market conditions. Kunal features as a guest speaker at various equity research platforms and news channels on a regular basis, sharing his valuable insights on the subject. His firm provides holistic view of stock investment recommendations to retail investors with respect to financial performance, strategy, and industry catalysts. The firm looks for stocks that are out of favour with the market and a combination of tangible and intangible aspects is used for stock picking with a great focus on income and growth portfolios. Kunal is featured regularly on Sky Business, CNBC and Australian Financial Review


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