Daily Management Review

World Stocks Set To Record Worst Performing Week In 5 Years


World Stocks Set To Record Worst Performing Week In 5 Years
The already existing fears among investors fears about trade war and economic growth was compounded by concerns over corporate profits to drive global stocks lower on Friday and set them up for a worst performance in five years.
Following the missing of market expectation by Alphabet and Amazon’s earnings US and European markets fell and was further compounded by disappointing European earnings.
There was a 1.5 per cent drop in the leading index of euro zone stocks. There was a dorp of 1.7 per cent in Germany’s DAX and 1.8 per cent in France’s CAC 40.
Following the start of trading in Europe, there was a drop of 0.3 per cent in the MSCI All-Country World Index that records shares in 47 countries. The index is on way to record losses for the fifth straight week which is the longest losing streak since May 2013.
“Expectations for US company earnings are quite high, so whenever they are not being met, the reactions are quite severe,” said Miraji Othman, credit strategist at BayernLB.
“We have grown used to solid numbers, 18 percent revenue growth, 25 percent revenue growth and so on. The valuations have become quite ambitious.”
A potential rough session for U.S. markets was set up by a 0.84 per cent drop in S&P E-mini futures.
The lowest point since February of 2017 was nit by MSCI’s broadest index of Asia-Pacific shares outside Japan with a drop of 0.9 per cent which r\wiped off all of the gains that the index made in the opening hour. The attention on the slowing of the second largest economy of the world – China, was drawn as its currency yuan slid past a key level.
The MSCI Asia index is on course for its fifth weekly loss – driven by its battering and a sell off during the last several days. The index is all set to record its longest losing streak since 2015 with more than 4 per cent fall this week.
There was a drop in Chinese shares and the yuan dropped below the key figure of 6.96 to the dollar and reached its lowest level against the dollar since December 2016.
While the broader market in South Korea dropped by 1.75 per cent, the economy also saw drop in stocks of tech firms. The lowest level since December of 2016 had been earlier reached by the Kospi.
Australian shares ended flat. There was a drop of 0.4 per cent in Japan’s Nikkei stock index.
The concerns over global growth because of the US-China trade war, a mixed report for  US corporate earnings, rate increases by the US Federal  Reserve and the Italian  budget dispute with the European Commission had battered the global financial markets in recent sessions.
“The first, and most important (worry) is that Fed tightening and fading fiscal stimulus will cause the US economy to take a turn for the worse ... The second is that China’s economy will continue to struggle,” analysts at Capital Economics said in a note to clients.
“As we have been arguing for a while now, these worries are likely to get worse over the next twelve months or so.”

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