Market Update: What’s Happening In The Global Markets?

  • Oct 12, 2018 AEDT
  • Team Kalkine
Market Update: What’s Happening In The Global Markets?

With the strong momentum and the optimistic outlook regarding the US economy, why the global markets are witnessing a strong downtrend? There could be multiple reasons which are impacting the global markets. The primary reason for the global meltdown is the higher interest in the US. However, the US President is supporting the present hawkish monetary policy outlook and views that these decisions of raising the rates negatively impact the global economy. The Federal Reserve is highly optimistic about the US economy and, as a result, they decided to maintain the hawkish stance on the monetary policy. The Federal Reserve has given away the policy of quantitative easing and is now focusing on quantitative tightening to check inflation.

The US economy is on uptrend which prompts the central bank to raise the interest rates. The company has also witnessed a favorable momentum in the wage growth. However, earlier the concerns of the elevated oil prices have been relaxed. Earlier, there were concerns like the crude might touch the $100 mark however, now the market players and more importantly, emerging economies need not to worry about that. The downward trend in the oil prices have been primarily fueled because of a rise in the oil inventories of the US as well as increased production from OPEC. When the issues of the oil prices were relaxed, the marker got a hit by the higher yields and global sell-offs.

Understanding the Performance of Australian Markets

It seems like the Australian markets are on the border line. The International Monetary Fund’s report suggested that the potential impacts from the trade wars might disrupt the Australian economy. However, the next month meeting between the US and China might result in the relaxations from the trade tensions. Secondly, about the financial system. According to the central of Australia, the broader financial strength has witnessed some sort of improvement primarily because the capital positions of the major banks in the nation has improved significantly from the past years. The mortgage lending standards have also been made strict which has reduced the risk probability.

Also, if the Royal Commission report has gone through, the additional layer of regulations would further improve the financial system. However, it could also impact the Australian economy as the businesses would not be able to easily obtain credit and thus this could hamper the growth. The Reserve Bank of Australia also fears from the global shocks like downturn in the Chinese growth, increased sovereign as well as banking debt problems which is being witnessed in Italy and finally, the negative impacts which the emerging economies are exposed to.

On October 12, 2018, S&P/ASX200 witnessed the positive momentum as the index ended at 5895.7 which implies an intra-day increase of 11.9 points or 0.2%. Lynas Corporation (ASX: LYC) and Resolute Mining Limited (ASX: RSG) saw strong upward trend as they advanced 9.231% and 8.824%, respectively. On the other hand, Fairfax Media Limited (ASX: FXJ) and Domain Holdings Australia Limited (ASX: DHG) ended the day lower by falling 13.548% and 13.438%, respectively.

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