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Last Week in Review: Global Markets Continue to Decline as Investors react to China, Oil and Weaker Economic Data

Last Week in Review: Global Markets Continue to Decline as Investors react to China, Oil and Weaker Economic Data
Jan 18, 2016 By Imran Valibhoy Tags: STO, WPL, NST, BHP. RIO

Last week continued to be quite a bearish week for most of the global markets, as investors were pessimistic about the uncertainty in China, ongoing slump in the oil price, along with the recent chain of weak economic data.

USA: Dow Jones Finished the Week Below 16,000

All the major US indices finished in the red last week. The S&P 500, NASDAQ, along with the Dow Jones Industrial Average all closed the week more than 2% lower. The Dow Jones Industrial Average finished below 16,000 for the week.

US investors continued to react to the volatility within the Chinese markets, along with the slump in the oil price, to below US$30 a barrel. However, an increase in unemployment claims, along with a more than forecasted dip in industrial production also contributed to the pessimism within the US market.

On the contrary, investors were reassured by some members of the FOMC (Federal Open Market Committee), that the Federal Reserve will only continue with their ‘gradual’ rate hiking programme, if it’s backed up by positive data, and if the US economy can withstand the hikes.

China: Continued to Slide

China continued to slump last week, as Chinese investors remained uncertain about the performance of the Chinese economy in the year ahead. The Shanghai Composite finished almost 10% down for the week and 18% since  the beggining of the year. Whilst the blue chip CSI 300 contracted almost 8% for the week.

While the overall economic data has contributed to the sell-off, the Chinese trade balance released last week was better than expected. 

Alongside the slide in the Chinese market, the Japanese Nikkei 225 continued to fall for the year, closing over 3% down for the week.

Europe: The Pessimism Continued

The negative sentiment within the Chinese and US markets reached Europe, with most of the major European markets finishing in the red for the week. The German DAX finished almost 3% down for the week. Whilst the London FTSE 100 closed almost 2% down for the week.

The FTSE 100 and the DAX are down around 5% and 8% respectively for the year.

ASX: Mining Shares Slide Further

The ASX continued to fall last week, as the ongoing slump in oil prices contributed to a sell-off in mining shares. The S&P/ASX 200 finished 2% lower for the week.

Oil miners Santos (ASX:STO) and Woodside Petroleum (ASX:WPL) fell over 11% and 2% respectively, to $2.87 and $26.9. Iron ore giants BHP Biliton (ASX:BHP) and RIO Tinto (ASX:RIO) each fell over 3% and 2% respectively, to $15.07 and $39.50.

However, gold miners Northern Star Resources (ASX:NST) finished 1% up for the week, to $2.76, as they released a strong December Quarterly Activities Report, which showed they have a $30 million increase in cash, bullion and investments.

ASX Currently Down Upon Open 

With the ASX Futures poising a drop upon the open, the ASX continues to slide, with the S&P/ASX 200 down over 1% at the open (As at 10.40am AEDT), to 4,841 points.

Oil producers and miners opened substantially lower with Santos (ASX:STO) down almost 6%, BHP Billiton (ASX:BHP) shedding almost 3%, and RIO Tinto (ASX:RIO) dropping over 2%.

Upcoming Economic Data Announcements

All times are denominated in AEDT

19th January
-1pm: Chinese Retail Sales
-1pm: Chinese Real GDP
-1pm: Industrial Production

20th January
-12.30am: US CPI (December)
-8.30am: US Crude Oil Inventories

21st January
-11.45pm: ECB Interest Rate Decision

22nd January
-12.30am: US Unemployment Claims
-3.00am: US Crude Oil Inventories (January)

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Imran Valibhoy Author: Imran Valibhoy Jan 18, 2016

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.

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