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Correction territory; are we in a bear market?
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Dreams of a Santa rally have been squashed overnight, after Wall Street marked its worst start to December trading since the Great Depression in 1931. The Dow Jones dove more than 500 points, taking its total losses to more than 1,000 points over two-sessions. The S&P 500 fell almost 2.5% and is now at its lowest close for the year. Technology stocks didn’t escape the chaos with the Nasdaq sliding 156 points or 2.27%. The Dow and the S&P are both in correction territory with some Wall Street analysts already calling it a bear market.
The major sell-off comes as investors brace themselves for the U.S. Federal Reserve’s December meeting over monetary policy, where the central bank is expected to raise the cash rate by 0.25%. The Fed has raised interest rates three times this year, raising criticism from U.S. President Donald Trump on Twitter.
“It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!” Trump tweeted.
As Wall Street stocks tumbled, the USD strengthened with the Australian Dollar falling to 0.7176 and the EUR/USD pair falling to 1.134. The AUD is now at its lowest level since November 12 but still higher than its lowest close of 0.70484 on October 5.
The local share market is set to follow Wall Street, with the SPI Futures down 85-points at 0830 AEDT. Investors will be keeping an eye on the language used in the RBA’s monetary policy meeting minutes, due out at 1130 AEDT. But the focus remains on the U.S. Fed and whether the central bank will raise rates further in 2019.
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