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Tech leads U.S stocks lower; Oil markets digesting Saudi tensions; USD hit after weaker Retail sales;

Oct 15, 2018 | Market Updates

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19:30 GBP Average Earnings Index

Tech shares led major indices lower on Monday, the Dow dropped 89- the S&P500 fell by 16.34 and the Nasdaq lost 66 pts. Apple and Netflix both losing more than 1.8%. Chipmakers where also in the seller’s line of fire, The VanEck Vectors Semiconductor ETF (SMH) declined 1.1%, led by a 4.5% decline in Nvidia. “You have an oversold condition and the market knows it should try to find a bottom,” said Robert Pavlik, chief investment strategist at SlateStone Wealth. “But you have a crosscurrent of factors that’s preventing it from doing that.” These factors include interest rates and earnings, he said. “Valuations are attractive, but this crosscurrent keeps people from feeling like this is a bottom they can trust,” Pavlik added.

The major indexes registered their worst weekly losses since March last week as yields jumped to multiyear highs. “Certainly, the bond market is suffering from rising inflation anxieties,” said Jim Paulsen, chief investment strategist at The Leuthold Group, in a note to clients. “Investors face a significant risk that only their grandparents had to deal with—a bond market potentially demanding a larger inflation buffer.” “Many believe inflation will only rise modestly in the balance of this recovery,” Paulsen said. “However, even a moderate acceleration in wage and consumer price inflation toward 3.5% to 4% could produce an outsized and surprisingly aggressive response from the bond market.”

Earnings season is back,  Netflix, Morgan Stanley, Johnson & Johnson, Procter & Gamble and Honeywell are among the companies scheduled to release third-quarter earnings this week.

European shares closed slightly higher as Brexit talks hit an impasse, a potential slowdown in the Chinese economy and higher U.S. borrowing costs capped investor confidence. The DAX had a decent session adding 90 and the FTSE closed 33 pts higher. Brexit investors were seen looking ahead to a crucial European summit on Wednesday. Negotiators from the U.K. and European Union failed to clinch a Brexit deal over the weekend, with both sides citing unresolved issues relating to frontier checks between Ireland and Northern Ireland. – CNBC

Oil had a mixed session gaining 78 cents during the day and also trading 84 cents lower. USOUSD settled 22 cents lower. Political issues remain in the spotlight, over the disappearance of a prominent Saudi journalist stoked supply worries. Riyadh is under pressure after journalist Jamal Khashoggi, a critic of the kingdom and U.S. resident, disappeared after visiting the Saudi consulate in Istanbul. Data showing South Korea did not import any Iranian oil ahead of the full renewal of U.S. sanctions on Iran also support price.

Gold added $9.40 as stocks continued in uncertainty, the USD also gave buyers a boost as it declined after worse than expected retail sales data. The market had been looking for .7%, but the data came in at .1%. The dollar was already under pressure before the data shock speed up selling. The AUD GBP and EUR all closed higher. Brexit developments also helped boost the EUR and GBP during the London and U.S session. The USD lost 29 pips to the CAD and 37 pips to the Yen. Risk traded flat to lower to the JPY is a lacklustre session. GBPJPY finishing higher by 28 pips. This morning better than expected NZ CPI (0.9%) data gave the NZD a nice boost, The NZDUSD adding over 45 pips post data.

Bitcoin jumped during the London session hitting a 1046 gain in two hours before sellers faded the move. Price settled 130 higher at 6368 after hitting a high of 7291!

The ASX200 finally seeing some green, price is 26 pts higher at this point in morning trade.

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Sources; CNBC – All times are AEST

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