Wild swings as markets head to more uncertainty

GLOBAL STOCK MARKET FACING UNCERTAINTY AS NEW YEAR APPROACHES US GOVERNMENT SHUTDOWN HEADING INTO ITS SIXTH DAY WHIPSAWED MARKETS

The question is, whether this is just a snapback bear market rally, or a tremendous opportunity to buy stocks

Chris Weston, Head of research, Pepperstone Group

FRANKFURT — More wild market swings appeared imminent on Thursday, with US stocks heading sharply lower after the largest single-day gain in history for the Dow.

Slowing economic growth globally and a partial US government shutdown heading into its sixth day whipsawed markets from Europe to Asia.

US stocks tumbled 1 per cent on Thursday in a broad-based decline led by energy shares, giving back some of the gains from a spectacular rally a day earlier that helped the blue-chip Dow Jones Industrial Average surge more than 1,000 points for the first time ever.

All the 11 S&P sectors fell more than 1 per cent and all the 30 components of the Dow Jones Industrial Average were in the red. The Dow Jones Industrial Aver- age was down 1.5 per cent to 22,535.46, the S&P 500 was down 1.01 per cent to 2,442.83 and the Nasdaq Composite was down 1.96 per cent to 6,425.57.

The Dow Jones Industrial Average shot up more than 1,000 points — its biggest single-day point gain ever — rising nearly 5 per cent as investors returned from a one-day Christmas break on Wednesday.

"Traders will be booking profits from the gains they made yesterday and that will be the major focus for investors

Naeem Aslam, Chief market analyst at Think Markets UK

The broader S&P 500 index also gained 5 per cent, and the technology-heavy Nasdaq rose 5.8 per cent.

“The real question is: Do we have follow-through for the rest of this week?” said Sam Stovall, chief investment strategist for CFRA.

Trading resumed in European markets which had been closed for the Christmas holiday, and the German DAX slid 2.4 per cent to 10,378.31. France’s CAC 40 gave up 0.63 per cent, to 4,597.24. Britain’s FTSE 100 fell 1.5 per cent to 6,585.91.

The rally was because the market was very oversold and small investors mostly boosted the market higher, said Naeem Aslam, chief market analyst at Think Markets UK Ltd in London.

“Traders will be booking profits from the gains they made yesterday and that will be the major focus for investors,” Aslam added.

On Wednesday, US markets snapped a four-day losing streak and clocked their best day in more than 10 years as the Dow jumped 5 per cent, or 1,086 points, to 22,878.45. Advisers to President Donald Trump said there were no plans to oust Fed chairman Jerome Powell, though his sentiment on the man he nominated, played out it tweets, seem as volatile as the stock markets. Strong holiday sales, up more than 5 per cent during the holiday season in the US, also lifted spirits in the shortened trading week. Mastercard Spending-Pulse said US shoppers spent more than $850 billion this year.

“The question, of course, is whether this is just a snapback bear market rally, or as Trump said, a tremendous opportunity to buy stocks?” Chris Weston of Pepperstone Group Limited said. “We can assess the fundamental drivers, such as poor global economics, the Fed not altering its forward guidance or providing flexibility to the pace of balance sheet normalisation, and ascertain nothing has really changed here,” he added.

Bloomberg reported that the US will send a government delegation to hold trade talks with Chinese officials in Beijing in the week starting January 7. It cited two people familiar with the matter. This follows a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in Argentina earlier this month. The two leaders agreed to hold off on additional tariffs for 90 days, to work on disagreements on trade and technology policies.

Nikkei 225 index rebounded 3.9 per cent to 20,077.62. It tumbled more than 5 per cent on Tuesday before recovering slightly a day later. South Korea’s Kospi was less than 0.1 per cent higher at 2,028.44. The Shanghai Composite index lost 0.6 per cent to 2,483.09. The Hang Seng index was 0.7 per cent lower at 25,478.88 while Australia’s S&P-ASX 200 jumped 1.9 per cent to 5,597.20. Stocks climbed in Taiwan and throughout Southeast Asia.

The Indian stock market ended higher on Thursday. The S&P BSE Sensex settled 157.34 points or 0.44 per cent higher at 35,807.28 after touching an intra-day high of 36,041.24 and a low of 35,781.95. The NSE’s Nifty50 gained 49.95 points or 0.47 per cent to finish at 10,779.80.