US Pessimism Grows
US equities declined in overnight trading, as the fall in the oil price to below US$30 plagued investors.
The Dow Jones Industrial Average lost approximately 296 points, or 1.8%, to 16,154 points. Likewise, the S&P 500 fell 36 points, or around 1.8%, to 1,903 points. The story continued within the NASDAQ, with the index losing over 103 points, or 2.2%, to 4,517 points.
Losses were particularly felt in the Banking and Energy sectors. With Goldman Sachs (NYSE:GS) falling almost 5%, along with Exxon Mobil (NYSE:XOM) contracting 2.2%.
WTI Crude declined 6.3%, to below US$30 a barrel. WTI crude recovered to as high as US$33 per barrel last week, as speculation arose that the Saudi led OPEC oil cartel was open to discussing a gradual production cutting programme with Russia.
Vice chairman of the Federal Reserve Stanley Fischer spoke in New York on the 1st of February. Discussing their rationale behind keeping rates unchanged, at their January 26-27th meeting. Emphasising how the current volatility in the global markets may alter their ‘gradual’ rate hiking programme.
European Markets Fall
The story was inherently similar in Europe, with all major indices finishing in the red. The German DAX lost 177 points, or 1.8%, to 9,581 points. Likewise, the London FTSE 100 contracted 138 points, or 2.2%, to 5,922 points. The European Euro Stoxx 50 declined 69 points, or 2.3%, to 2,952 points.
Chinese Equities Surge
There was renewed confidence in the Chinese markets yesterday, with the PBOC (People’s Bank Of China) pumping 100 billion yuan (or around US$15 billion) into the banking system. As a result, the Shanghai Composite gained 61 points, or 2.2%, to 2,750 points. Likewise, the Blue Chip focused CSI 300 added 60 points, or almost 2.1%, to 2,961 points.
However in Japan, the Nikkei 225 lost approximately 115 points, or 0.6%, to 17,751 points.
ASX: Energy Shares Declined
In Australia, the S&P/ASX 200 fell 50 points, or 1%, to 4,993 points. With the majority of declines coming from the Energy sector, as crude oil shed a further 5%.
Diversified miner BHP Billiton (ASX:BHP) fell 2.1%, to $14.92, following S&P’s downgrading of their credit rating. Likewise, RIO Tinto (ASX:RIO) declined almost 4%, to around $37.50.
Oil miners Santos (ASX:STO) fell over 4.2%, to below $3. In similar fashion, Woodside Petroleum (ASX:WPL) lost 3.2%, to $27, and Oil Search (ASX:OSH) declined 2.7%, to $6.37.
However, some of the biggest gainers yesterday were Gold miners Northern Star Resources (ASX:NST), which surged 3.7%, to above $3.00. Along with OceanaGold (ASX:OGC) which surged 8.6%, to $3.13.
Meanwhile, the RBA announced that they will be holding rates at a record low 2%, citing strong jobs growth as a key factor. Whilst stating that they will continue to keep an eye on current market volatility for their next meetings.
Author: Ben Khouri
Feb 03, 2016
Ben Khouri is a financial editor for Wise-Owl with a particular focus on the top ASX 300 companies. Having a vast background in economics and finance, Ben provides financial commentary & analysis as well as global market updates, which guide investors in devising investment strategies. Ben specialises in analysing economic data and global events from around the world and examines the impacts they have on the major equity markets.