Market Update: Optimism In The US Markets, Is It A Trap?

With Some Optimism on October 12, 2018, Does the Market Rout Witnessing an End?

It would not be wrong to say that for the market players and for the rational investors 2018 has been a roller-coaster ride in terms of the investments. In February 2018, the significant downturn in the markets were witnessed primarily because of the trade tensions between the US and China. At first, the optimistic investors have thought that this war might end soon. However, that notion has become false as till now the war concerns are looming over the global markets.

Later on, some macro data (like lower unemployment) of the US economy helped the markets. As 2018, kept on unfolding, new and important issues came to the light. Jumping to the recent ones, the oil prices were also the primary concern of the global economists as the supply shortages were because of the Iran sanction imposed by the US. Global supply shortages in the oil have severely impacted the global economy and particularly the emerging ones. India has been witnessing the downturn because of the depreciation of the currency as well as huge reliance on the oil imports. This has even raised the concerns for the current account deficit. Later on, the higher oil prices worries came to an end, but the concerns of the higher yields weighed on the investors which boosted the global sell-off in respect of the equities.

The positive momentum in the US markets on October 12, 2018 was witnessed primarily because of the decline in the bond yields, optimism related to the trade battle between the US and China as well as favorable momentum in the Chinese growth. However, some of these variables might come back with a bang if the meeting between US and China did not serve the purpose. The meeting would be taking place next month.

What You Need to Know About Australian Markets?

The Australian markets ended the day on a weaker note. S&P/ASX200 ended the day at 5837.1 which reflects the decline of 58.6 points or 1.0%. Because of the significant negative momentum which was witnessed in the previous week, this weakness was widely anticipated by the market participants. However, a matter of concern is significant downtrend which being encountered by the technology sector in the Australian markets. The FAANG stocks also saw negative momentum primarily because of the increased yields. However, at the time when these stocks witnessed correction, that could be considered as a buying opportunity.

Moving forward, if the positive momentum is being experienced in the technology stocks of the US, the broader markets might encounter favorable momentum. Apart from this, the optimism in the US tech stocks would also drive the technology stocks in Australia. However, Speedcast International Limited (ASX:SDA) and Santos Limited (ASX:STO) have ended the session by advancing 3.733% and 2.903%, respectively. On the other hand, amongst the IT stocks, Afterpay Touch Group Limited (ASX:APT) and Altium Limited (ASX:ALU) ended the day lower by declining 6.644% and 3.297%, respectively.

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