Sharp Declines for all Major US Indices
The US market lost all of its gains from the previous trading session, amongst continued volatility in the oil price, along with uncertainty in China.
The Dow Jones Industrial Average sharply declined 252.15 points, or 1.47%, to 16,906.51. These declines continued in the S&P 500, which contracted 26.45 points, or 1.31%, to 1,990.26. Similarly, the NASDAQ Composite shared the same sentiment, which lost 55.66 points, or 1.14%, to 4,835.77 points.
US investor sentiment is quite low, due to the ongoing volatility within China and the sharp decline in the crude oil prices which have slid below their GFC levels.
The US energy sector was the worst performer, losing over 3% at the end of the trading session, with Chevron losing almost 4% at the close of trading, in response to the negative sentiment centred on the dampening oil price.
Pessimism Continues in Europe
The pessimism continued into Europe in overnight trading, with all major European indices closing in the red. The London FTSE 100 lost 63.86 points, or 1.04%, to 6,073.38 points. Likewise, the German DAX finished 96.08 points, or 0.93% lower, to 10,214.02 points. The European STOXX 600 declined 1.3% upon the close of trading.
These declines were in response to the sharp decrease in the crude oil price, which closed at its lowest since December 2008. Investor sentiment in Europe remains grey, with the continued volatility within the world’s second biggest economy, ongoing dampening of the oil price, along with the uncertainty surrounding sluggish performance of the US economy in the New Year.
Chinese Markets Surge; North Korean Threat Drives Investors to Safe Haven Assets
China slightly recovered from the slump in the previous trading session, where a 7% decline on the CSI 300 coincided with a trading halt, that caused the market to close for the rest of the day. The Shanghai Composite gained 74.13 points, or 2.25%, to 3,361.84 points. Similarly, the CSI 300 added 61.03 points, or 1.75%, to 3,539.81 points.
In Japan however, the Nikkei 225 lost 182.68 points, or 0.99%, to 18,191.32 points, in response to North Korea’s supposed Hydrogen Bomb test launch yesterday, which drove investors to safe haven assets, such as the Yen and Gold bullion.
Declines Back Home Continue
The negative sentiment continues back in Australia, with the ASX/S&P 200 losing 1.2 % upon the close of yesterday’s trading, with continued volatility in the oil price, China’s continued devaluation of their currency, and the slow start in the US markets.
BHP and RIO were hit quite hard, in response to the drop in the Iron ore price, which made the mining giants lose 2.4% and 3% respectively, at the close of yesterday’s trading.
However, retailers JB-Hi-Fi were some of the best performers yesterday, gaining over 2% at the close of yesterday’s trading.
With the continued rout in the oil price to December 2008 lows, there will be renewed pressure on Aussie oil miners, who are struggling to prosper in this dampened environment.
Author: Simon Herrmann
Jan 07, 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.