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

The Irish Times - Business - - BUSINESS NEWS - JOE BRENNAN

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.

Heavy sell­ing

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.

Rate in­creases

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.

DUBLIN

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.

LON­DON

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.

EUROPE

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.

WALL STREET

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:

PHO­TO­GRAPH: REUTERS

An ap­pre­hen­sive bro­ker on Wall Street yes­ter­day. In­vestor wor­ries are grow­ing as US pres­i­dent Don­ald Trump threat­ens a gov­ern­ment shut­down.

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