Factors that are Shaping up the Global Stock Markets

Factors Impacting the Stock Market: Price movements in a stock market are guided by macro-economic factors such as unemployment, inflation, interest rates and economic growth. Good economic growth is directly proportional to profits generated by companies that are listed on the stock market. This, in turn, adds value to the stocks.

• Interest rates have an indirect relationship with price movement in the stock markets. As the interest rates decline, the market goes up and vice versa. Thus, we can say that declining interest rates contribute to economic growth. This is because cost of funds decline in a low-interest-rate scenario and companies are able to borrow funds required for expansion of a business or setting up of new businesses.
• An economy with high inflation will see a downtrend because interest rates will be pushed up, thereby slowing economic growth. This happens because companies tend to avoid borrowing in a high-interest-rate environment.
• Economic growth of a country is also hindered by rising unemployment which has an adverse impact on the stock market.

Hence, an investor must keep a close watch on the above factors that shape up the economy of a country, which in turn results in an upward or downward price movement in the stock market.

Stocks in U.S. saw a volatile trade resulting in the biggest drop in S&P 500 index in a month due to announcement regarding a formal impeachment inquiry against Mr. Donald Trump, as media reports have said. Trump stated that there was no pressure imposed on the Ukranian President for investigation into the business dealings of Democratic presidential hopeful Joe Biden. This in turn might impact the market for the next few days as the democrats support the impeachment proceedings against Trump. On 24 September 2019, S&P 500 index went down by 25.18 points or 0.84%, closing at 2,966.60.

Let us now have a look at the stocks that shaped the S&P 500 index during the day’s (24^th September 2019) trade:

Top 5 Gainers: Top performers during the day’s trade included Intuitive Surgical Inc. that closed at a market price of US$ 541.46, rising by 2.56% on previous day’s closing price. The second highest performer was Conagra Brands Inc., that last traded at a price of US$ 29.56, up 2.28% on in comparison to previous day’s closing. Other top performance included Hanesbrands Inc., Cboe Global Markets Inc. and Norfolk Southern Corp. that went up by 2.27%, 1.99% and 1.89%, respectively.

On 24 September 2019, markets were also impacted by some economic reports. Since consumer spending is the backbone of the American economy, markets have seen a decline due to the negative impact of the US- China trade tensions. As per media reports, the consumer confidence index in the US, for the month of September 2019, went down to 125.1 which is much lower than the expectation of 133.0 issued by economists.

Top 5 Losers: Shares of Tesla Inc. saw the largest decline of 7.47% during the day, closing at a price of US$223.21. This was followed by Marathon Oil and Helmerich & Payne Inc. that closed at market prices of US$12.22 and US$40.76, respectively. The stocks witnessed a decline of 6.72% and 5.93% in comparison to previous day’s closing. Other losers in the list included Halliburton Co. and Cimarex Energy Co. that went down by 5.43% and 5.14%, respectively.

Dow Jones Industrial Average went down by 142.22 points or 0.5% and closed at 26,807.77. The index has also been impacted by the slowdown in economic growth due to trade restrictions imposed by President Trump. Nasdaq Composite also declined drastically by 118.83 points, closing at 7,993.63. In percentage terms, the index declined by 1.46%.

The scenario on 25^th September 2019 in Australia

The turmoil in the global markets also impacted the Australian share market with S&P/ASX200 declining by 0.6% on 25 September 2019. The index closed at 6,710.2 points, going down by 38.7 points during the day. Lately, it has witnessed the repercussions of the trade was between US and China that has been constantly pushing the markets down. As stated in a few media reports, the current scenario pertaining to the trade war has impacted stocks from all the sectors, including retailers, miners, financiers and technology stocks. Economists have issued warning of the impending signs of slowdown in the Australian economy if the trade war between the two countries continue.

Among the top 5 gainers on ASX during the day’s trade was Afterpay Touch Group Limited (ASX: APT), which closed at a market price of $36.000, up 13.314% on 25 September 2019. APT was followed by Bravura Solutions Limited (ASX: BVS) gaining 4.11% at a closing price of $4.31. Smartgroup Corporation Limited (ASX: SIQ) was the third one in the list, gaining 2.29% at a closing price of $12.07. Regis Resources Limited (ASX: RRL) and Collins Foods Limited (ASX: CKF) went up by 1.85% and 1.59%, respectively.

Healthcare firm Pro Medicus Limited (ASX: PME) reported the highest decline in stock price at 28.080, down 5.803% on 25 September 2019. Beach Energy Limited (ASX: BPT) witnessed a decline of 5.576% at a closing price of $2.540. Jumbo Interactive Limited (ASX: JIN) closed at $23.300, going down by 5.285% after the day’s trade. The stocks of Magellan Financial Group Limited (ASX: MFG) and NRW Holdings Limited (ASX: NWH) witnessed a decline of 4.827% and 4.781%, respectively.

Conclusion

Overall, it can be observed that markets saw a decline under the weight of US-Chine trade tensions, the announcement regarding impeachment of President Donald Trump and weak US data. The US market was impacted by a drop in the consumer confidence index against expectations. Australian stock market has also been hit hard by the trade war. With tensions escalating, the market may even find itself being pushed into a prolonged downtrend.

However, some economists have shared an optimistic view stating that the situation can be fixed by adhering to the international trading norms as prescribed by World Trade Organisation. The economist also stated that Australia would benefit from raw material exports to China, if the Chinese government decides to invest in the development of infrastructure. Moreover, changes can also be made in-house, from changes in the tax regime and spending on infrastructure in order to revive the Australian economy.

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