Australian share market tumbles 2 per cent on opening

Lloyd Doyle
October 11, 2018

US stocks plunged Wednesday as investors ramped up their selling of high-flying technology and internet stocks.

The Dow Jones Industrial Average plunged more than 800 points, led by sharp declines in technology stocks.

United States stocks plunged to their worst loss in eight months on Wednesday as technology companies continued to drop.

Japan's Nikkei 225 added 0.2 percent, South Korea's Kospi dropped 1.1 percent and the Hang Seng in Hong Kong gained 0.1 percent. And there is still an overhang from the US trade dispute with China, which accounts for sizeable portions of some tech companies' revenue.

"Both companies highlighted rising costs, not only input costs but increasing operating expenses (and) marketing expenses", she said.

Compared to the start of this year, one aspect of current market conditions may be concerning. The Labor Department said its index of producer prices has climbed 2.6 percent over the last 12 months, the smallest increase since January. The benchmark USA stock index hadn't suffered a five-day losing streak since November 2016, just before the presidential election. The Nasdaq dropped more than 4% in the worst percentage decline since June 2016.

The Dow Jones Industrial Average gave up 500 points, or 1.9 per cent to 25,926. But over the past five days, the losses stuck, and on Wednesday the selling went on right to the closing bell.

Microsoft dropped 4 percent to $107.82. Amazon lost 6.2% and Netflix gave back 8.4%.

Amazon has soared 50 percent this year, but has fallen 14 percent from its all-time high in early September. In 1987, stocks dropped more than 20 percent on a single day-Black Monday, Oct. 19-after a strong rally crashed into the Persian Gulf turmoil and trade deficits. Insurance companies slumped as Hurricane Michael hit the Florida Panhandle. Berkshire Hathaway dipped 4.1% to $214.64 and reinsurer Everest Re slid 4.6% to $218.97.

Luxury retailers tumbled. Tiffany plunged 9.5% to $111.28 and Ralph Lauren fell 7.3% to $118.42.

The advance of US Treasury yields to more than seven-year highs, as well as escalating fears over US-China trade relations, has hurt equity investor confidence, with the major US indexes losing more than two per cent overnight. It was at just 3.05 per cent early last week and 2.82 per cent in late August.

Every S&P 500 sector fell heavily, with big-name technology stocks like Facebook and Apple among the biggest drags on the USA market.


For example, a yield rise in a month of one standard deviation or less, which would be 20 basis points now, is manageable for stocks, Goldman said in a note last week.

So bond yields, the return an investor realizes by owning a bond, move in the opposite direction of prices.

Technology and internet-based companies are known for their high profit margins, and many have reported explosive growth in recent years, with corresponding gains in their stock prices.

Adams, of Bloomberg Intelligence, said investors have concerns about their future profitability, too. "Semiconductors have the most exposure to China out of segments in the S&P 500".

Meanwhile struggling retailer Sears was in focus as the Wall Street Journal reported that it was preparing to file for bankruptcy.

MSCI's gauge of stocks across the globe fell percent, its biggest single-day fall since February. It was more than $40 five years ago. Over the years, Sears has closed hundreds of stores and sold several famous brands.

Oil firms Hess Corp and Marathon Oil fell around 7 per cent as Chevron dropped 3 per cent ahead of the third-quarter earnings season. Brent crude, the worldwide standard, lost 2.2 per cent to US$83.09 a barrel in London. The Fed has predicted that unemployment will remain below 4 percent through 2020 and inflation is expected to track around 2 percent, conditions that Federal Reserve chief Jerome H. Powell called "remarkably positive".

In London, the FTSE 100 was down by 1% as hopes of a Brexit deal lifted the pound - weakening the sterling value of earnings for numerous global index's multinational constituents.

The November crude contract was down US$1.79 at US$73.17 per barrel and the November natural gas contract was up 1.8 cents at US$3.28 per mmBTU.

The December gold contract was up $1.90 at US$1,193.40 an ounce. Snap, the parent company of the messaging app Snapchat, fell 4.8pc and sank to a new all-time low.

Mona Mahajan, US investment strategist at Allianz Global Investors, said: "The market is digesting the potential that rates moving upwards eventually seep into the real economy in the form of mortgage rates, auto rates, student lending rates". Brazil's Bovespa lost 2.5 percent and the Merval in Argentina sank 2.2 percent.

The dollar fell to 112.59 Japanese yen from 113.05 yen late Tuesday.

Other reports by Iphone Fresh

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