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ASX 200 falls while the VIX soars as global uncertainty intensifies

Today we examine the ASX sectors worst hit, one of the best performing Australian stocks and what is likely driving recent equity market volatility.

ASX 200 & VIX in focus Source: Bloomberg

Prior to the last couple of days, equity markets had remained mostly subdued for the last six weeks. The ASX 200 floated along nicely, with many well-known names rising steadily in that period.

Markets can’t march indefinitely upwards though – and while history suggests that equities do tend to rise in the long-term – such musings say nothing about short term-volatility or sharp corrections in between those bull-cycles.

On that front, the ASX 200 has fallen around 3.8% in the last two trading sessions – shedding a little more than 100 points during today’s session alone.

The catalyst behind these declines? Trump, it would most likely seem.

For one, Trump came out today and said ‘in some ways, I like the idea of waiting until after the election for the China deal. But they want to make a deal now, and we’ll see whether or not the deal’s going to be right.’

Markets – generally speaking, tend to react unfavourably towards uncertainty – and Trump’s comments look to be supplying investors with just that. That is, the prospect of a drawn out trade war – and its potential to dampen the already damp global growth outlook is likely weighing on investors’ minds.

In addition to this, the US came out Tuesday with a ‘a strongly worded bill paving the way for sanctions against Chinese officials over human rights abuses in Xinjiang,’ according to the South China Morning Post.

China's foreign ministry was swift to respond to the passing of this bill, claiming it ‘wantonly smears China's efforts to eliminate and combat extremism.’

Regardless of this, while the S&P 500 has itself fallen 1.61% in the last two trading sessions – current S&P futures would suggest a slight bump when American markets open later tonight – Australian Eastern Standard Time.

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ASX 200: volatility abound, opportunity afoot

The ASX 200 fell off the back of all this global noise, with all the big-name ASX shares – like CBA, ANZ, Woolworths, BHP, Rio Tinto and CSL – falling.

Consumer staples, information technology and the energy sector were all hit the worst – declining 2.27%, 2.11% and 2.01% – respectively.

At the other end of spectrum, the S&P/ASX 200 VIX Index – an index that tracks volatility – climbed 5.63% today.

There were pockets of success, mind you, as there always is.

The recently-battered oOh!media (ASX: OML) saw its share price skyrocket as much as 23% today, as the company bumped up its FY19 earnings guidance (underlying EBITDA) from $125 million to $135 million to $138 million to $143 million.

Mind you, oOh!media still trades some ways off its 52-week high, with the last traded price sitting at $3.720 per share.

Cloud-based accounting software firm Xero (ASX: XRO) also saw its share price rise 1.5% during today’s session – to $81.00 per share – likely attributable to Morgan Stanley bumping up their price target on the tech stock from $65.00 to $90.00.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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