Market Updates: Australian Market Continues to Decline: Global Factors, Increasing Yields Are Headwinds

  • Oct 09, 2018 AEDT
  • Team Kalkine
Market Updates: Australian Market Continues to Decline: Global Factors, Increasing Yields Are Headwinds

Week Started Off on A Bad Note: How Long Will This Continue?

After the long holiday, the Chinese market came out on Monday and they tried to react to all the news which they missed in the previous week. The major concern which has been impacting the global markets is the higher rates prevailing on the debt products. Probably that’s the reason that even the US market capped the gaining momentum. The Dow Jones Industrial Average ended October 8 on a positive note at 26,486.78 implying an increase of 39.73 points or 0.15%. However, the broader markets ended the day lower primarily because of the rising rates which seems to weigh on the investors’ sentiments.

The increased government bond yields have been prompting investors to deploy the investable capital into the risk-free assets rather than increasing their exposure towards equities which are considered riskier than debt products. The strong momentum in the government yields leads to higher costs for the companies as well as investors. This has also led to the reassessment in regard to the equity valuations. Therefore, further outflows from the equities might be witnessed primarily because the investors might consider reshuffling of their portfolios.

Analyzing the Performance of Australian Market

The Australian market continued to fall today, as expected, thus continuing the losing streak for the second day of the week. S&P/ASX200 ended the day at 6041.1 which represents a fall of 59.2 points or 1.0%. The Australian market has been facing the global pressure and they are reacting in line with the global markets. The investors are losing their trust in the equity markets as the higher rates in the fixed income markets continue to be one of the favorite spaces for the Australians.

Apart from the elevated government yields, the Australian stocks seem to be impacted by the trade dispute between the US and China as well as favorable momentum in the Chinese economy. These factors have raised concerns regarding the fundamentals of the Australian economy. On October 9, 2018, NEXTDC Limited (ASX: NXT) and Mineral Resources Limited (ASX: MIN) ended the day on the positive note as they have advanced 2.61% and 1.551%, respectively. On the other hand, Bellamy’s Australia Limited (ASX: BAL) and Resolute Mining Limited (ASX: RSG) ended the day by declining 6.25% and 5.66%, respectively.

However, Monash IVF (ASX: MVF) also witnessed a strong downtrend on October 9, 2018. The company has made an announcement regarding the resignation of the chief executive officer or CEO and managing director with the immediate effect. As per the company’s statement, the chief executive has stepped down because of the personal reasons. He was also not able to plan a shift to Monash IVF Group in Melbourne. The stock declined 9.174% at the time of writing.

A View on What’s Happening in Chinese Market

The policy makers in China made an announcement that the Reserve Requirement Ratio has been lowered. As a result of this, the major banks have been allowed to keep the reserve capital lower than they were keeping. This step by the central bank of China reflects that they are trying to improve the credit creation. The views on China are optimistic lately. The economy’s growth is expected to remain at approximately 6.5%. Other factors which have been supporting the Chinese economy include: stable prices as well as strong employment data.

Dividend Stocks To Buy

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