Stocks continue to sell-off on US recession fears

Stock markets plunged last night, as investors’ fears grow that the global economy could be heading for a severe economic slowdown.

Worries about US growth driving markets

Stock markets plunged last night, as investors’ fears grow that the global economy could be heading for a severe economic slowdown. The volatility generated by Wednesday’s disappointing US ISM Manufacturing PMI data was compounded by a miss in key US labour market data overnight, with several US data points in coming days taking on greater significance. In separate news, oil prices plunged, as US crude inventories showed a bigger than forecast build, and also compounded worries about weaker global economic activity. Outside the US, concerns about Brexit also intensified, after UK Prime Minister Boris Johnson released his final Brexit proposal.

Stocks tumble overnight, ASX to follow suit

It was a day of high-volume selling in stock markets across the globe, yesterday. The S&P 500 shed 1.8% in the North American session, while the DAX gave-up 2.8%, and the FTSE100 dropped 3.2%. It was a clear risk-off atmosphere, with investors dumping equities en masse and fleeing to safe-haven assets. US Treasuries rallied, pushing bond yields in the United States lower, as traders increase bets that the US Fed will have to take a more assertive approach to managing the unfolding slow-down in the US economy. It’s setting up weak day for the ASX: SPI Futures are suggesting a 120 point drop for the ASX 200 this morning.

Investors now worried about the US labour market

There is a burgeoning “snow-ball” effect as it relates to market sentiment right now. There’s a sense that fear is feeding on fear, as its wont to do in financial markets when signs of panic emerge. The initial pang was that very weak, and justifiably concerning, US ISM Manufacturing PMI data on Wednesday, which emphasized the trade war’s stifling impacts on the US economy. But last night, it was a rather small miss in US ADP Non-Farm Employment data that fanned the flames of fear. With investors clearly hypersensitive, the miss in that release introduced the idea that perhaps softening business conditions is spilling into the labour market.

Focus turns to next batch of US data

That makes a handful of data releases out of the US in coming days of high-importance. First, will be the release of US ISM Non-Manufacturing PMI data, which will be watched to see if the weakness in US manufacturing is tipping-over into the services sector. Of greater significance, will be the release of US Non-Farm Payrolls data on Friday night. The labour market, and somewhat by extension, the American consumer, has remained the shining light for the US economy. If the jobs markets, and ergo the outlook for consumption, starts to show signs of turning, this panic in the market can only grow.

What a difference a year can make

Colour will also be provided by a speech scheduled for US Fed Chairperson Jerome Powell on Saturday morning, Australia time. To step back a moment, it bares reflecting: it was on this very day last year that the Fed-head made his “a long way from neutral” speech, which began the big stock market sell-off of late 2018. How far the market has come. Only 12 months ago, the Fed was talking about how much further it needed to hike interest rates to manage a hot US economy. Now, as anxiety about the global economy builds, the market will be waiting to hear about how aggressively the Fed plans to cut rates.

Oil prices fall again after US inventory data

In commodities markets, oil remains the primary focus for traders, after prices fell by over 2% during US trade. US Crude Oil inventories data was released last night, and showed a much smaller than expected drawdown in inventories, with 3.1 million barrels of oil, versus a forecast 2.0 million barrels, being held by US energy firms, last week. Along with the concerns about global economic activity, the lift in inventories added to fears about energy demand, bucking (again) the supply side concerns that had driven price in September, following the drone attack, allegedly perpetrated by Iran, on Saudi Arabian oil production facilities.

Risk of a no-deal Brexit slightly higher:

Across the Atlantic last night, and UK and European traders were fixed-on UK Prime Minister Boris Johnson’s pitch at the Tory party’s conference, within which the UK PM outlined his final Brexit proposal. The deal centres on modifications to the contentious Irish back-stop, with the UK PM stating that he is comfortable allowing for a no-deal Brexit, should this latest proposal not be accepted by the EU. Given its considered a low-chance that the EU will accept the deal, market participants have judged these latest Brexit developments to raise the risk once again of a looming “hard-Brexit”. That saw the Pound plunge further into the 1.22 handle overnight.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.