International Stock Markets Decline the Most since August
US stocks fell the most in three months snapping a run of six weekly gains amounting to 8.3% rise in October. The Chicago Board Options Exchange Volatility Index increased last week for the first time since reaching a four-year high during the August selloff. Whilst investors seemed to have ignored the macroeconomic challenges during the October rally, fear about a slowing Chinese economy and the upcoming rate hike were back on the table last week. US and European markets are not certain the world economy is strong enough to withstand a Fed rate hike after operating near zero percent since the GFC.
European markets lost the most since September due to Energy and Mining sector declines. The U.K’s benchmark index FTSE 100 suffered its biggest weekly loss since the August sell off due to declining oil prices, subdued consumer confidence and weak unemployment data.
ASX Falls 3.1% Dragged Down by Commodities
Whilst Australian stocks opened higher on Monday as Healthcare, Industrials and Financial stocks gained at the beginning of the week, Energy stocks declined due to crude oil price weakness that continued throughout the week. The local share market followed the lead of global equities and lost 3.1% for the week. Information Technology and Healthcare were the only two sectors holding up throughout the week. The Australian share market is 6.7% lower year to date.
The Australian Bureau of Statistics released a surprisingly lower unemployment rate of 5.9% for the month compared to the previous 6.2%. RBA Governor Glenn Stevens commented that the next rate move will likely be down. Nab released a business confidence report last Tuesday showing that business confidence fell despite better business conditions.
According to Nab’s report confidence in service providers has suffered the most. Westpac’s consumer sentiment rose 3.9% and the report states this is due to a change in government leadership as the index is up 8.3% since Turnbull’s election in September.
BHP Slumps 10% for the Week
BHP shares tumbled more than 10% since it reported an accident in its Samarco project in Brazil. The stock is now trading at its lowest point in the last ten years. The share price is also affected by historically low commodity prices, especially iron ore and crude oil, which is a result of oversupply and weak demand from Emerging countries and China.
Outlook: What’s Up this Week?
The recent terror attacks in Paris will likely have a sharp short-term impact on the markets as these attacks are deemed to be the worst to hit France since the Second World War. Historically terror attacks have encouraged selling in the short-term, however markets have recovered within a few weeks.
The inflation data is due to be released in the US, Europe and the UK this week. The US is also going to release further building and housing data this week. UK will also release its retail sales data on coming Thursday. As always investors will pay close attention to all sorts of comments regarding monetary policy by Central Banks.
Author: Imran Valibhoy
Nov 16, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.