Australian shares rebounded from Wednesday’s underperformance, with broad gains across every sector of the market even as the local currency faltered against the U.S. dollar. Rising for the first session in three, the S&P/ASX closed 1.4% higher at 5633.4. Energy was the strongest sector as the subindex recovered with a jump of 3%, while the heavily weighted big banks logged gains of between 1.2% and 2.3%. Healius rallied 7.8% after landing a takeover bid worth US$1.41 billion from Jangho Group and Cimic gained 3.2% following news that one of its contractors secured a contract to expand a hospital. But retailer Kathmandu sank 14% after warning of weak sales over Christmas and Boxing Day.
The Dow Jones Industrial Average slumped intraday, as weak economic data and a rare sales warning from Apple sparked new worries about a global slowdown. The blue-chip index dropped 517 points, or 2.2%, to 2829, after falling more than 650 points earlier in the trading session. The S&P 500 fell 1.8% and the technology-heavy Nasdaq Composite shed 2.3%. At their lows on the day, the Dow and S&P 500 were both down more than 2% in 2019, their worst start to a year since 2000. Nine of the 11 sectors in the S&P 500 fell. The technology sector shed 4%, with Apple shares dropping 9%. Meanwhile, dividend-paying “safety” stocks, which investors typically buy when they are nervous, rose with the real-estate group mildly higher. Utilities also rose. Selling accelerated after data showed a decline in U.S. factory activity in December, intensifying concerns that economic growth is weakening. That followed data earlier this week that showed China’s manufacturing activity contracted last month for the first time since May 2017. The stock market is trying to decipher whether companies are starting to curtail production plans due to slowing demand, said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.
Gold futures climbed a second straight session to their highest finish in more than six months as U.S. stocks saw a sharp pullback and the dollar softened. “Obviously, the concerning news from Apple sales in China has created an additional wave of equity market selling, and that in turn has continued to pump money towards gold,” analysts at Zaner Precious Metals wrote in a daily report. A bearish revenue outlook from iPhone-maker Apple rattled markets, with investors pushing the technology-heavy Nasdaq Composite Index sharply lower. The Dow Jones Industrial Average and the S&P 500 index also declined as gold futures settled. Apple shares headed lower after the tech giant announced a rare cut to its sales forecast, citing sluggish economic growth in China, which could also be exacerbated by the longstanding tariff dispute between Beijing and Washington. February gold on Comex gained $10.70, or 0.8%, to settle at $1,294.80 an ounce, after the commodity closed 0.2% higher in the prior session. Prices marked another finish at the highest since the middle of June. Meanwhile, wheat for March rose 7 cents to $5.13 3/4.
Iron Ore: 72.23s + 1.17 (January Contract)
Oil prices ended higher for a fourth straight session as investors shrugged off declines on Wall Street and focused instead on indications that major oil producers — including Saudi Arabia — are reducing output as promised. West Texas Intermediate futures, the U.S. oil standard, ended 1.2% higher at $47.09 a barrel on the New York Mercantile Exchange. The fourth session of increases was the longest streak upward since late August when prices rose five days in a row. Brent crude, the global oil benchmark, closed up 1.9% at $55.95 a barrel on London’s Intercontinental Exchange. Brent has also risen four straight sessions.
The U.S. dollar declined intraday after a report showed a deceleration in factory activity as trade tensions contributed to a reduction in demand for goods made in America. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.4% to 89.75. The dollar weakened broadly, including 0.5% against the euro and 0.9% against the yen. Investors retreated from the dollar after the Institute for Supply Management said that its manufacturing index fell to 54.1 in December, partly driven by waning demand. Numbers above 50 indicate activity is expanding across the manufacturing sector, while numbers below 50 signal contraction. Economists surveyed by The Wall Street Journal had expected a 57.9 reading for December. The weaker data led to an erosion in expectations for interest-rate increases this year. Fed-funds futures early showed that investors estimate a 66% chance that rates remain at current levels through the end of the year, a 34% probability that the Fed cuts rates and little chance of an increase, according to CME Group data.
The Stoxx Europe 600 closed down 1% at 333.92 as tech stocks took a hammering following U.S. giant Apple’s revenue warning. Shares in Austrian semiconductor maker AMS fell 23.5%, ST Microelectronics lost 11.7%, while Infineon Technologies and Siltronic were also among other tech stocks that suffered sharp losses after the U.S. smartphone maker blamed weaker Chinese demand for the revenue guidance cut. Electronic payment groups Temenos and Wirecard also took a hit, falling 8.1% and 5.9%, respectively. Still, retailers rose after slightly-better-than-expected Christmas sales from U.K. firm Next, whose shares rose 4%, while German online fashion retailer Zalando gained 4.4%. Regionally, Germany’s DAX index lost 1.6%, while France’s CAC 40 ended down 1.7%. The U.K.’s FTSE 100 ended down 0.6%, Italy’s FTSE MIB was down 0.6%, while Spain’s Ibex 35 closed 0.3% lower.
Tech stocks in Asia were battered by Apple’s disappointing guidance due to weaker sales in China. South Korea’s benchmark Kospi fell 0.8% to a two-month low. Samsung Electronics and SK Hynix fell 3% and 4.8%, respectively. In Hong Kong, Apple supplier AAC Tech and Sunny Optical, which makes handset lenses, plunged by more than 5%, underperforming the broader index’s 0.3% drop in the late afternoon session. China’s Shanghai Composite was little changed, on the back of a rebound for brokers and precious metal stocks. Lenders and Insurers were also up. Elsewhere in Asia, indexes in Taiwan and Singapore were also down. Indian shares extended losses for the second straight session following the global market selloff. The S&P BSE Sensex closed 1.1% lower at 35513.71 after falling 1% the previous session. Analysts said that apart from global markets, investors will shift their focus to the domestic corporate earnings season, which starts next week, for more cues.