Markets in sell mode as new data highlights global slowdown
03 Oct 2019
New market data from major economic including the United States, Germany, the UK and France has pushed stock market investors into selling off shares, with growth contraction prevalent across countries and specific sectors.
Yesterday, US HR firm ADP presented their estimated job figures, which showed a decline in the numbers finding work. Just prior to this, the US manufacturing PMI (Purchasing Managers Index) showed a continued reduction in the growth of American manufacturing, based on surveying performed over the past month.
Figures released today showed that both the UK and German services sectors are also in decline, dropping to 49.5 and 51.4 points respectively. For the UK, it means that the traditionally strong services sector is now shrinking, but for Germany it is the lowest services PMI for three years, and the first decline in service sector growth since December 2014.
Stock markets across the world bore the brunt of the investor reaction yesterday, with the FTSE 100 down 3% at one point; a figure which would have been its worst day for four years.
By the end of trading, the markets were performing as follows:
- USA: Dow Jones – 300 points down (1.12%) 🔻
- USA: S&P 500 – 35 points down (1.19%) 🔻
- USA: Nasdaq – 98 points down (1.24%) 🔻
- UK: FTSE 100 – 188 points down (2.55%) 🔻
- EU: Stoxx 50 – 95 points down (2.72%) 🔻
- FR: CAC 40 – 129 points down (2.3%) 🔻
- DE: DAX 30 – 230 points down (1.88%) 🔻
- ES: IBEX 35 – 252 points down (2.74%) 🔻
- IT: FTSE MIB – 352 points down (1.61%) 🔻
- CN: SSE – 26.98 points down (0.92%) 🔻
- JP: Nikkei – 436.87 points down (2.01%) 🔻
Today the FTSE has steadied, though it is still 41 points down today (0.58% lost), while other markets such as the Spanish IBEX and Hong Kong’s Hang Seng Index are reporting equal gains of 0.26%.
Safe haven assets have picked up the slack from the markets, with gold gaining £9.91 per ounce in the past 24 hours to reach the present £1,219.92 per ounce. Similar gains – around 1.11% - have been made for gold in Dollar denomination, though some analysts believe that today’s data from the US (non-manufacturing) could be another kick in the shins for the stock markets, as could tomorrow’s official Department of Labor job figures.
If contraction continues, and recession looks more likely, then interest rates are probably going to be cut further. The Federal Reserve has already started to cut rates, the European Central Bank are cutting AND have reinstated quantitative easing, and the Reserve Bank of Australia have also announced fresh rate cuts.
As rates come down, saving opportunities and yields drop too, giving gold a much better opportunity cost (because gold has no yield) and making precious metals as a whole more attractive as an alternative investment option.