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Global Markets Decline; Crude Oil Continues its Rout

Global Markets Decline; Crude Oil Continues its Rout
Jan 21, 2016 By Simon Herrmann

All the major indices closed in the red in overnight trading amongst uncertainty with the 2016 global outlook along with the continued slump in oil prices.

US Markets Continue Declines

The Dow Jones Industrial Average lost 249 points, or 1.6%, to finish at 15,767 points. In similar fashion, the S&P 500 lost 22 points, 1.17%, to 1,859 points. However, the NASDAQ closed rather lightly, only losing 5 points, or 0.12%, to 4,472 points.

The S&P 500 closed at its lowest level since the start of 2014, with losses coming from the energy sector, as WTI Crude Oil contracted over 6%, to around $US26 a barrel, continuing to breach over 13 year lows.

The cost of living, as recorded by the CPI, was lower than expected at 0.7%, on a year by year basis. The markets anticipate that the ongoing rout in commodity prices has most likely contributed to this declining figure. Meanwhile, building permits increased by a more than forecasted 232,000. However, neither of these figures could drive out the bearish sentiment in the US market.

Negative Sentiment in Europe

In Europe, all the major indices felt the repercussions of the falling oil price. The London FTSE 100 fell over 203 points, or 3.5%, to finish 5,674 points. The energy sector contributed to the losses, with miners Glencore and Anglo-American losing over 9% and 7% respectively.

Likewise, the German DAX closed 273 points, or over 2.8%, to 9,392 points. The Euro Stoxx 50 index closed almost 100 points lower, or over 3%, to 2,883 points.

Asia: China Continues to Slump

Meanwhile, in yesterday’s trading, all the major Asian markets finished in the red, citing concerns for sustained growth and lower commodity prices. The Shanghai Composite closed 31 points, or over 1% lower, to 2,977 points. Likewise, the CSI 300 finished 48 points, or over 1.5% lower, to 3,174 points.

In Japan, the Nikkei 225 finished 600 points, or almost 4% lower, to 16,416 points, officially entering a bear market. Losses were coming from major exporters, such as car manufacturers Nissan, Honda and Toyota.

ASX Drops to Two-and-Half-Year Low

In Australia, the S&P/ASX 200 contracted 62 points, or over 1.2%, to 4,841 points, to reach a two-and-half year low, upon the close of trading yesterday.

Oil miner Santos (ASX:STO) continued its sell-off, falling almost 7.5%, to below $2.50, amongst the fall in the oil price from overnight US trading. Origin Energy (ASX:ORG) fell 9.5%, to below $3.50.

Meanwhile, Iron Ore giant BHP Billiton (ASX:BHP) fell 3.5%, to 11 year lows of $14.21, as it announced yesterday that it will have additional charges of $US300-450 million, from redundancies and inventory write-downs. Rio Tinto (ASX:RIO) lost over 2.7%, to below $38.

However, there were some bright spots in the market yesterday. Gold miner Northern Star Resources (ASX:NST) gained over 1.6%, to finish at $3.14, partially due to positive drilling results from its partnership with Tanami Gold NL (ASX:TAM). Additionally, Sydney Airport (ASX:SYD), which finished 2.5% higher, to $6.47, in response to a positive December traffic report.

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Simon Herrmann Author: Simon Herrmann Jan 21, 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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