US shutdown fears batter global stock markets
Nasdaq on cusp of confirming bear market territory as US stocks slide Aryzta leads Irish large-caps lower as Iseq index drops to fresh low
Global stock markets came under renewed pressure yesterday with Wall Street dropping further as the threat of a US government shutdown this weekend compounded concern over the global economy and the risk that the Federal Reserve will go too far in raising interest rates.
US president Donald Trump told politicians he would reject a Bill to fund the government into next February, setting up a showdown over his ambition of winning $5 billion (€4.4 billion) to fund a border wall with Mexico. That led to a new fall for equity markets still digesting the Fed’s monetary policy update on Wednesday, which had disappointed investors hoping for a more dovish tone in response to global growth worries and market turmoil.
The US benchmark S&P 500 was down more than 2.6 per cent at its worst, extending Wednesday’s heavy selling. The tech-heavy Nasdaq Composite index dipped into bear market territory – a fall of more than 20 per cent from its August high – before a slight rebound, but it was still languishing more than 1.5 per cent lower in mid-afternoon trading.
Crude oil prices also retreated, with Brent crude down more than 5 per cent to $54.30 a barrel, the latest in a string of sell-offs that has left the international benchmark down 9 per cent for the week to date.
In Dublin, the Iseq tracked European peers by dropping 1.2 per cent, marking its lowest level since immediately after the UK’s Brexit referendum in June, 2016. The pan-European Stoxx 600 index dropped 1.5 per cent, after earlier hitting its lowest level since November 2016. Germany’s Dax shed 1.4 per cent, France’s CAC 40 fell 1.8 per cent, while in London, the FTSE 100 edged lower by a more modest 0.8 per cent.
The Fed on Wednesday reduced its forecast for 2019 rate increases. Chairman Jay Powell particularly unnerved markets by saying he did not see the central bank changing its “autopilot” policy of reducing the size of the Fed’s balance sheet. “As widely expected, the Fed revised down its outlook for future rate increases and made other dovish changes to its message,” said Goldman Sachs economist Zach Pandl. “But it was not dovish enough to support markets.” – Copyright the Financial Times Limited 2018
The Iseq overall index of Irish shares dropped to a fresh 2½-year low yesterday as markets sold off globally while investors digested the US Federal Reserve’s interest rates outlook from the previous day.
The Iseq dropped 1.2 per cent to 5,376.61, marking its lowest level since immediately after the UK Brexit referendum in June 2016. The pan-European Stoxx 600 index closed 1.4 per cent lower.
Aryzta led Irish large-caps lower, falling 3.6 per cent to 92 cent, while Bank of Ireland dropped 3.4 per cent to €4.98 and CRH, which accounts for a quarter of the Iseq, dipped 2.9 per cent to €21.84.
Homebuilders were also out of sorts with Cairn falling 2.2 per cent to €1.05, while
Glenveagh declined by 2.2 per cent to 67 cent, with traders saying that investors are ignoring the positive fundamentals of the Irish sector to punish it in line with UK peers. Bucking the trend, Smurfit
Kappa climbed 4.2 per cent to €23.13, recovering some of the ground the boxmaker lost recently amid a wider packaging industry sell-off.
The FTSE 100 closed down 0.8 per scent with the mid-cap index 0.9 per cent lower, after hitting multi-year lows in early trading. In result-driven moves, Carnival tanked 10.8 per cent to the bottom of the main index after the world’s largest cruise operator forecast an adjusted profit for the first quarter that missed market expectations. Oil heavyweights Shell and
BP were the biggest drags on the main index, as crude prices slipped back into negative territory. Utilities, often seen as a safe haven, helped the main index recoup some losses. National Grid was up 2.4 per cent after a rating upgrade by CFRA, with Severn Trent and United
Utilities also rising. After starting the week with a profit warning from online fashion store
Asos that shook retail stocks, the shopping sector saw some good news as British retail sales topped expectations in November thanks to Black Friday promotions.
Among individual movers on Thursday, shares in Airbus fell 4.4 per cent after Le Monde newspaper reported the United States had opened an investigation into allegations of corruption, raising the stakes of probes already under way in Britain and France.
Shares in aluminium company Norsk Hydro fell nearly 3.5 per cent and was among the top fallers in Europe after the United States said it would lift sanctions against its competitor Rusal.
After a strong 2017, analysts have been cutting their forecasts for euro zone 2018 earnings growth steadily throughout the year. They now expect a growth of around 4.4 per cent, down from a peak of 10 per cent at the start of the year. Estimates for 2019 have also been cut.
US stocks slid with the Nasdaq on the cusp of confirming bear market territory, as the Federal Reserve’s plan to continue its balance sheet reduction and the threat of a partial government shutdown fuelled investor anxieties.
At its session low, the Nasdaq had tumbled 2.85 per cent, pushing the tech-heavy index more than 20 per cent below its August 29th closing high. The index, along with the Dow and the benchmark S&P 500, pared losses as the session continued. The Nasdaq ended down 19.5 per cent from its closing high, just shy of confirming a bear market.
The Fed’s move to largely adhere to its plan for more rate hikes over the next two years and keep its balance sheet reduction plan on “autopilot” spooked investors. Adding to the gloom was the possibility of a partial US government shutdown yesterday. The Dow Jones fell 464.06 points, or 1.99 per cent, to 22,859.6, the S&P 500 lost 39.54 points, or 1.58 per cent, to 2,467.42 and the Nasdaq dropped 108.42 points, or 1.63 per cent, to 6,528.41. – Additional reporting:
An apprehensive broker on Wall Street yesterday. Investor worries are growing as US president Donald Trump threatens a government shutdown.