Macroeconomic pressures including oil price losses were the main market drivers forcing the indexes lower for the day.
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FEDERAL RESERVE: In minutes from the Federal Reserve’s July meeting officials appeared to move closer to raising interest rates for the first time in almost a decade despite concern over the risks to the U.S. economy from China’s slowdown.
Net sales for the period rose 11.4% to US$115.3mln from US$103.5mln the year before. “To think you can have half the global economy underperforming and have it not spill over to the other half is hard to imagine”. On Thursday, U.S. stocks suffered their worst day in 18 months, with the Dow Jones industrial average and Standard & Poor’s 500 both off 2.1 percent and the Nasdaq composite down 2.8 percent. It also outpaced Wall Street expectations for a shallower rise. In Europe, France’s CAC-40 declined 1.1% and Germany’s DAX lost 0.8%. The German blue-chip index is up 6.4% for the year but is now 16% below its April high.
Traders are also expressing continued uncertainty about the outlook for interest rates following the release of a batch of largely upbeat U.S. economic data. Brent crude, a benchmark for worldwide oils used by many U.S. refineries, fell 13 cents to $48.69 per barrel.
In the U.S. specifically lower oil prices have been a major cause for concern and a drag on price stability which is a main factor the Fed considers in monetary policy decisions. Shares gained 3.4 per cent.
Apple also dragged on the S&P tech index, which moved into negative territory for the year after its 1.9 percent decline.
Kazakhstan stopped defending its currency, triggering a 23 per cent collapse in the tenge. A weaker currency makes a country’s exports cheaper.
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“We have been conditioned to buying on the dip”, said Quincy Krosby, a market strategist for Newark, N.J.-based Prudential Financial Inc., which oversees more than $1 trillion. Chinese shares have had a wild ride this week and that has raised questions about Beijing’s ability to stabilize the market after the devaluation of China’s currency.
“Investors are increasingly concerned about global growth being undermined by China’s decelerating economy”, Mark Luschini, chief investment strategist at Janney Montgomery Scott told USA TODAY. “There is clearly a desire to raise rates at the Fed, I’m just not sure at this stage whether everyone is quite on board yet for a September hike to occur”, said Craig Erlam, senior market analyst at OANDA. “A lot of people are really looking forward to getting this Fed [rate hike] behind us”.
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Many economists think rates could increase as early as September, but some say recent market volatility overseas could push the hikes back.
