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ASX and US Markets off to Slow Start; Chinese Markets Edge Higher Upon State Intervention

ASX and US Markets off to Slow Start; Chinese Markets Edge Higher Upon State Intervention
Jan 06, 2016 By Simon Herrmann

US markets slightly recovered in overnight trading today, following a rather sluggish start to the year, amongst the uncertainty of Chinese economic growth. The ASX is off to a slow start as well.

S&P 500 Adds 0.2%; Investor Sentiment Mixed

The S&P 500 closed 4.04 points higher, or 0.2%, to 2,016.70 points. Similarly, the Dow Jones Industrial Average added 9.72 points, or 0.06%, to finish at 17,158.66 points. However, the NASDAQ finished 11.66 points lower, or 0.2%, to 4,891.43 points.

Despite the slight recovery in US trading today, investors are still uncertain about the ramifications of the Chinese slowdown on global growth, where weakening Chinese manufacturing data, along with a 7% slump in the CSI 300 contributed to a 1.5% decline in the S&P 500 upon the finish of the previous trading session.

Crude Oil Resumes Slide

Meanwhile, West Texas Intermediate Crude for February delivery fell 51 cents, or 1.4%, to $US36.25 a barrel, amongst speculation that US Crude inventories have risen. However, Investors are still trying to determine the impact of the increase in tensions between Saudi Arabia and Iran, which was exacerbated by the Saudi execution of a prominent Shiite cleric, along with the attack of the Saudi embassy in Tehran, following the execution.

Most European Markets Edge Higher

In Europe, most of the indexes edged slightly higher upon the close of trading. The FTSE 100 finished 43.81points, or 0.72% higher, to 6,137.24. Similarly, the German DAX surged 26.66 points, or 0.26% higher, to 10,310.10 points. However, with weakening growth in China, and its impact on US markets, investors in Europe are still relatively uncertain about the year ahead.

Chinese Stocks Stabilise after Government Intervention

In Asia, the Shanghai Composite closed 0.3% lower, to 3,287.71 points. Similarly, Japan’s Nikkei dropped 0.42%, to 18,374 points.

However, through the support of state owned financial institutions, the CSI 300 finished 0.3% higher, to 3,478.78 points upon the close of yesterday’s trading, after a 7% rout in the index on Monday, following weakening Chinese manufacturing data. China has now introduced a new ‘Circuit Breaker’ policy, where a 5% movement in the CSI 300 causes a trading halt for 15 minutes, and a 7% movement in the CSI 300 causes a trading halt for the rest of the day.

ASX Off to Slow Start

In Australia, the negative sentiment continues. The S&P/ASX 200 finished 86 points, or 1.5% lower, to 5,184.4 points. These declines were in reaction to the decreases in the US market, the weakening in Chinese manufacturing data, along with the slump in the CSI 300 and the subsequent halt in trading within the Chinese market.

The energy sector declined the most, contracting 2.4% upon the close of yesterday’s trading. Meanwhile, Newcrest (ASX:NCM) gained 1.8%, supported by the slight surge in the gold price to US$1074 an ounce.

Despite a slight recovery in Iron ore, BHP Billiton (ASX:BHP) and Rio Tinto (ASX:RIO) both declined 1.2% respectively. However, Fortescue Metals (ASX: FMG) gained 1.3% upon the close of yesterday’s trading.

Struggling electronic retailer Dick Smith (ASX:DSH) announced yesterday that it has gone into voluntary administration, sighting its lack thereof strength in sales, along with its inability in garnering finance to support its ongoing operations. Following this announcement, Dick Smith was suspended from trading. The Stock has not performed well over the last year, losing over 80% of its value, currently priced at $0.355 cents.  

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Simon Herrmann Author: Simon Herrmann Jan 06, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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