China Slumps On US Sell-off, Hardline Speech From Xi
Asian equities slumped across the board following a massive sell-off in the US market. US equities shed more than 2.0% in Monday trading to set new 2018 lows for the broad market and blue-chip Dow Jones Industrials.
Adding to the woe were hardline remarks from Chinese President Xi Jinping. Xi said, in a speech, some thought would bring reform, that no one is in a position to dictate reforms to China. He says China should stay the course which is a nerve-wracking thing for trade-war weary markets to hear.
The Japanese Nikkei fell hardest, shedding more than 1.80% on Tuesday. The Australian ASX, especially sensitive to global growth worries, came in a not-so-close second with a loss of -1.22%. The Chinese Shang Hai and Heng Seng indices fell 0.82% and 1.05% while the Korean Kospi shed a much tamer 0.43%.
European Markets Weighed Down By Energy
European markets tried to stage a rebound in early Tuesday trading but were weighed down by the energy sector. The energy sector is moving to new lows on the back of rapidly declining oil prices, prices that fell to new long-term lows in overnight trading. Shares of energy companies were down an average 1.5% with little in view to support them other than hope OPEC’s production cut will help tighten markets.
The European bourses were mixed at midday Tuesday, led by the DAX and lagged by the FTSE. The German DAX was in the green with a gain near 0.30% while the FTSE posted a loss near 0.35%. The FTSE is struggling with the additional pressure of the upcoming Brexit deadline. PM Theresa May survived here vote-of-confidence but now faces the more challenging task of getting parliament to back her plan.
US Markets Rebound Tuesday, Supported By Data
The US market was able to stage a significant rebound on Tuesday as all sectors move higher. The early futures trade was supported by hope for the FOMC and some better than expected economic data. The Housing Starts and Building Permits figures both rose unexpectedly as construction spending begins to increase. The gains have Housing Starts up more than 3.2% from the last month and trending higher on a year over year basis.
The surprise jump in starts may be related to the FOMC and interest rates. The FOMC is meeting now and expected to hike rates in their statement tomorrow. The Fed is also expected to pause the pace of rate-hiking after this which means homebuilders need to act now if they want to lock in the lowest possible rates. Rates are still expected to rise next year, just at a slower pace than before.
The Tech sector led the market higher with the NASDAQ Composite posting a gain near 0.75% in early pre-market trading. The broad market S&P 500 and Dow Jones Industrials were right behind with gains near 0.60% each. Today’s trading is likely to be light with the FOMC release due out tomorrow, trade tensions in the air, a holiday next week, and the end of the year in sight.