Author: Christina Comben

On the back of freefalling Chinese equities and slowing growth, dwindling European markets, and signs that the next global economic downturn could be upon us, the US stock market got crushed yesterday. Nasdaq had its worst day in seven years after a series of late selloffs erased all gains for the year for the Dow Jones Industrial Average and the S&P 500.

Nasdaq Sees Worst Day in 7 Years

It was down and dropping with the worst of the bleeding coming from a late rout in US stock markets on Wednesday causing the S&P 500 to fall by 3.1% and the Nasdaq Composite to shed 4.4%–its biggest drop in a single day since August 2011.

Most of the panic selling happened in the last hour of the trading day as things went from bad to worse pretty quickly.

Tuesday’s Q3 earnings reports from US industrial giants 3M and Caterpillar took their toll on nervous investors with industry and energy among the hardest hit on Tuesday.

Yesterday’s bloodbath, however, was led by the communications services sector, chiefly, AT&T, ending 8% down after missing its quarterly profit forecast thanks to more and more Americans cutting the cord on their pay-TV subscriptions.

Fear and Panic Across All Industries

No industry was spared in the dive, and the tech sector also saw dramatic drops, with chipmakers, in particular, suffering from the decline.

The S&P 500 semiconductor and semiconductor equipment index dropped by 6.5%, registering its worst day since January 2009.

Stock Market Slide Continues in Asia

Thursday is shaping up to be another torrid day for Asian stock markets as China’s CSI index of mainland companies dropped by a further 2.8%, down by almost 9% in October, the worst month so far since January 2016.

The carnage was echoed in South Korea with the Kospi index down 12.6% and Japan’s Topix index down 11%. Both these markets are set to make October their worst performing month since October 2008.

Hong Kong’s Hang Seng also fell by 2.4% this Thursday, bringing the index down by 11% this month with its sixth consecutive monthly fall–the longest consistent decline since 1982.

Highly valued tech stocks also suffered a mighty battering after years of stellar gains. That included Chinese tech giant Tencent down by 3%, and AAC Technologies Holdings, a high-tech component maker slumping by 6% so far this Thursday.

Why Is This Happening?

Stock markets are funny things. And highly susceptible to external pressures. In the case of this October, there’s a combination of factors that have gotten investors spooked. Partly, the stock market, particularly the tech sector, has been on a multi-year bull run with overinflated prices and high valuations. In part, a correction of sorts in this sector is long overdue.

External geopolitical pressures are also weighing heavily on investor confidence and global stock markets, with many companies bracing for lower profit margins in the wake of rising global tariffs and interest rates.

The slowing growth in the Chinese economy, ongoing US-China trade war, uncertainty in Europe over Italian bonds and Brexit, and the tensions with Saudi Arabia after the killing of journalist Jamal Khashoggi are all battering a fragile stock market and causing investors to pull the plug.

Is the next global recession here? I hate to be the bearer of bad news, but let’s just say, the signs aren’t looking good.

Featured image from Shutterstock.

The last couple of years have been great (if you’re lucky enough to live in a country that’s managed to pull itself out of the last financial crisis). Stock markets have been on a lengthy bull run, the economy is booming, US unemployment is at a 50-year low, and, bam! It seems the party’s over folks. Stock markets suffered around the world on Tuesday and signs point to a global economic slowdown.

US Investors Unnerved

The US-China trade war isn’t just hurting the Asian economy. US manufacturing stands to lose as well. American investors were left rattled on Tuesday as large industrial companies reported that prices of their products would have to rise across the board–from earthmoving equipment to Post-its.

Concerns over rising interest rates, increased tariffs, and global inflation are all making investors a little twitchy. On Tuesday, large industrial companies Caterpiller, United Technologies (UTC), and 3M revealed their Q3 earnings reports.

All companies said that they will have to raise prices to cover the costs of labor shortage, decreased demand, and increased tariffs around the world. This is a price that will naturally be passed on to the end consumer.

Global Economic Slowdown May Be Imminent

While the IMF (International Monetary Fund) reports that growth in the world economy will continue in 2019, it conceded that in some larger countries like the US and China, it may have already reached its peak.

Caterpillar shares dove by as much as 7.7% on Tuesday and shares in 3M were down by 4.4%, as the prospect of a global economic slowdown increased investor anxiety.

The End Consumer Pays the Price

Caterpiller said they would be increasing their prices for their earth moving equipment by some 1-4% effective next year to reflect an increase in material prices and freight. While increased prices are expected to offset the rising costs, investors are still unhinged by the $400-million drop in Q3 earnings.

Office supplies and consumer products group 3M cut its 2018 earning projections by 4%, citing falling sales volumes in all regions except Asia-Pacific. The company is expecting an impact of as much as $100 million from tariffs next year which will translate to increased product prices.

The bad news wasn’t restricted to industrial companies either, with major consumer goods producers Kimberly-Clark also seeing a dented profit margin. The company expects increased prices on raw materials to push up end product costs.

Stock Markets Set to See Worst Month in Years

Yesterday was also a dark day for Chinese equities, on track to make October the worst month in the last two years. On Tuesday, the CSI 300 index fell by 6% in the face of mounting global pressures, and despite Chinese officials’ attempts to reinstate investor confidence in the economy.

The S&P 500 dove by 2.3% before bouncing back to close at 0.6%, and, amidst rising concerns over global growth, tariffs, the FTSE All-World index slid 1.4%. It’s currently facing its worst performance in a month since 2012 when the eurozone crisis was in full swing. Energy and industry have been hardest hit with stocks plummeting almost 10%.

Investors, it seems, are getting ready for a global economic slowdown. Brace yourself, the bears may be getting ready to come out of hibernation.

Images from Shutterstock.

There’s never a dull day in the stock markets and the latest movements in Chinese equities are enough to cause palpitations in even the most conservative of investors. After the best one-day gain in three years yesterday, Chinese equities swung the opposite way on Tuesday pulling down the European and US futures trade with them.

Analysts are now concerned over the Chinese authorities ability to boost its economy. Despite speeches of encouragement, contingency plans, and even tax deduction announcements, the markets have failed to stay in the green.

After jubilant shareholders finished the day Monday smiling from ear to ear, by midday on Tuesday the CSI 300 index of major Shanghai and Shenzhen companies was already down 1.7%. The same knock-on effect was felt in Hong Kong with the Hang Seng China Enterprises Index dropping by 1.9%.

These downward swings in Asia look set to drag the European futures trade down with them, with London’s FTSE 100 expected to lose 0.8% and Frankfurt’s Xetra Dax 30 down by 1.3%. All indications point to the same trend repeating in Wall Street, with the S&P 500 expect to open down 1% and the Nasdaq Composite falling by 1.2%.

Both European and US stock markets had a slow start to the week with the S&P 500 slipping by 0.4% yesterday and the pan-European Stoxx 600 also dropping by the same amount.

Global Geopolitical Pressures Affecting Chinese Equities

Despite considerable measures taken by Chinese authorities to bolster investor confidence, the markets are back in a tailspin. Yet, there is only so much that China’s central bank and governing party can do. There are plenty of other geopolitical factors in play that they simply cannot control.

These include president Trump threatening to withdraw from the US-Russia Cold War Nuclear Treaty, the tensions between Saudi Arabia and the west over the killing of journalist Jamal Khashoggi, European pressures with Italian bonds and Brexit, and, of course, the ongoing trade war.

Featured image from Shutterstock.