US markets on rebound as Europe, Asia stocks tumble

07 February, 2018, 02:02 | Author: Marjorie Miles
  • A general view of the reduced size of the trading hall at the Hong Kong Stock Exchange in Hong Kong

USA stocks dipped modestly on Tuesday, swinging wildly between positive and negative territory, a day after the Dow and S&P 500 indexes saw their biggest one-day declines in more than six years, while a world stock index dropped more than 1 percent.

The stock market freakout of 2018 hit a crescendo on Monday when the Dow plunged a record 1,175 points.

"The only data point of the day showed the USA non-manufacturing sector started 2018 in robust health", he said.

"That is not to say that we won't see further falls in coming days, but in an environment where growth is good and earnings are expected to rise globally, there are decent underpinnings", said James Knightley, chief global economist at ING.

Meanwhile, the S&P 500 lost one per cent to 2,622 points. The Dow closed down 4.6 percent and turned negative for the year.

Trading was choppy in the early going Tuesday, likely to be one of the most watched days on the markets in years.

Both the S&P 500 and the Dow sank more than 4 percent on Monday, their biggest falls since August 2011, as concerns over rising USA interest rates and government bond yields hit record-high valuations of stocks. Gold, for example, was up 0.4 percent at $1,343 an ounce. "They don't go up forever and we heard within the a year ago the market is up 22 or 24 percent".

Despite the huge declines, the selling is not being described as a panic, but rather a price correction in response to the Dow's ebullient 1,900 point rise in the first 18 days of the year and the almost 8,300 point jump since President Trump was elected. Bears, including short sellers that bet on the market decline, say that the market is over-stretched in the context of rising bond yields as central banks withdraw their easy money policies of recent years. The British FTSE 100 index fell 2.6 percent. The Standard & Poor's 500 index, the benchmark most professional investors and many index funds use, skidded 113.19 points, or 4.1 percent, to 2,648.94. The yield on the 10-year Treasury note rose to 2.78 percent from 2.71 percent.

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In Europe, Germany's DAX fell 2.3 percent and the CAC 40 in France lost 2.3 percent.

"The main reason for the decline on the USA stock market is that the recent figures released by the US looked pretty strong", explained Lu Zhengwei, chief economist at Shanghai-based Industrial Bank.

He said if we do have inflation and higher interest rates borrowing could get more expensive and ultimately investors may pay a little more for a vehicle loan or mortgage. Brent crude, the global standards, lost 57 cents to $67.06 a barrel in London.

The original trigger for the equities sell-off was a sharp rise in US bond yields late last week after data showed USA wages increasing at the fastest pace since 2009. Exxon Mobil fell 3.5 percent. Kljunich said numerous factors could contribute to fear in the marketplace, including rising interest rates.

On Monday, the Dow finished down 4.6 percent while the S&P 500 sank 4.1 percent. The Nasdaq composite lost 162.02 points, or 2.2 percent, to 7,078.93. It has been an uncommonly long time since the last market correction, which ended nearly two years ago.

Commodities remained gloomy, with oil and industrial metals all falling as the year's stellar start for risk assets rapidly soured.

Wholesale gasoline lost 4 cents to $1.81 a gallon.


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