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U.S stock continue lower – Dow fights back from 548 drop; Oil hammered down 4%; Global uncertainty boosts Yen

Oct 23, 2018 | Market Updates

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Stocks had a wild ride overnight, earnings a key driver, the Dow traded as much as 548 pts into the red as Caterpillar and 3M disappointed investors. McDonald’s jumped by 6% after strong earnings, with Procter & Gamble and Coca-Cola helped lead the fight back. The Dow fought back to close 125.98 lower. The S&P500 closed 15.19 points lower and at one point broke below 2700, “We broke below that 2,700 level on the S&P 500 and buyers came out of the woodworks,” said Jeff Kilburg, CEO of KKM Financial. “I think people were waiting for this and are now more comfortable” buying at these levels. But while he finds the move to be impressive, Kilburg said there will be more volatility moving forward.

The U.S. and China have implemented tariffs on billions of dollars worth of their goods this year, increasing costs for companies and raising fears that tighter global trade conditions could slow down the global economy. “We just look like we’re getting further away from a deal with China,” said Art Hogan, chief market strategist at B. Riley FBR. “The ramifications of a prolonged trade war are really seeping into investors’ minds right now.” “I think we’re coming to a capitulation point,” he said.

Things in Europe were also on a very red note, the DAX fell by more than 2%, the Stoxx 600 closed down 1.5%, slipping to its lowest level since December 2016. Diplomatic tensions in Saudi Arabia, concerns over Italy’s budget and earnings all depressed market sentiment. The export-heavy DAX is seen as particularly exposed to any slowdown in global demand. The energy sector was one of the worst performers as tumbling oil prices drove sellers. At the end of the session, the DAX closed 250 pts lower and the FTSE closed 87.59 points lower.

Oil tanked, price fell more than 4% its worst single-day fall in three months. Saudi Arabia’s energy minister seeks for a second straight day to assure markets that the kingdom will keep the world adequately supplied with crude. Stock market weakness also played a part in oils exodus. Brent crude fell by $3.70 a barrel, down 4.6%, to $76.13. USOUSD plunged 338 cents closing at 66.07.

Gold jumped on continued equity uncertainty adding $8.60, one point testing 1239.69 before settling after stocks trimmed losses. This morning gold is trading higher but 1232.70 remains as resistance. Palladium hit a new record high yesterday, with additional support from expected renewed demand from the Chinese automotive sector. The USD lost ground into the U.S session, after holding most currencies lower through the Asian and European sessions. The Yen continued as the main safe haven knocking the majors lower. Risk came back late into the London session, the EUR GBP and AUD all closing higher after pulling back from new weekly lows.

This morning the ASX200 is trading 5.30 points lower, the open looks to be supported by the late fightback seen late session in the U.S.

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Sources; CNBC – All times are AEDT

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