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Market week: Maximum pessimism?
3/25/2019 5:57:12 AM
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By Fund Library News Wire  | Friday, December 14, 2018


 

By Mike Keerma

The big North American stock indices posted losses again on the week, as investors reacted to slower-than-expected growth in both China and the eurozone. In addition, the European Central Bank announced earlier this week that it is ending its €2.6 trillion (US$3.9 trillion) bond buying program even as the eurozone posted a marginal 0.2% GDP growth rate in the third quarter. Markets continued their downtrend on Friday, despite some signs of easing in the U.S.-China trade dispute, a 0.2% monthly increase in U.S. retail sales in November, and a 0.6% increase in industrial production. The blue-chip Dow Jones Industrial Average is now down more than 10% from its October high, a decline that puts it into correction territory. The S&P 500 Composite Index fell 1.3% on the week, while the Nasdaq Composite Index lost 0.8%. Toronto’s S&P/TSX Composite Index retreated 1.4%, dragged down by the energy sector as crude oil fell 1.9% on the week.

Index

Dec. 7, 2018, close

Day

Week

Year to Date

S&P/TSX Composite

14,595.07

-1.1%

-1.35%

-9.96%

S&P 500 Composite

2,599.95

-1.9%

-1.26%

-2.76%

Nasdaq Composite

6,910.66

-2.3%

-0.84%

0.11%

Gold (US$)

$1,242.10

-0.4%

-0.95%

-5.13%

Oil (WTI) (US$)

$51.16

-2.7%

-1.86%

-15.33%

Official Chinese economic data showed that both retail sales and industrial production missed consensus estimates, with retail sales rising 8.1% in November compared with estimates of 8.8%, and industrial output rising 5.4% compared with estimates of 5.9%. Investors remain concerned, because China’s official data are typically overstated, and the true picture may be quite a bit worse. Adding to the suspicion that all may not be quite as rosy as painted by China’s official sources, the Ministry of Finance announced that various tariffs on American-made autos would be cut to 15% from 40% for three months starting Jan. 1. In addition, China purchased 1.13 million tonnes of U.S. soybeans, its first major purchase since imposing tariffs on U.S. soybean imports back in July. This is notable, because China does not grow its own soybean supply and relies mostly on U.S. and some Brazilian crops to fill its livestock feed and other needs.

Some analysts believe that intimations of a slowdown in the world’s second-largest economy, along with year-end tax-loss selling and portfolio window dressing have investors worried that market indices could break below some key technical indicators, triggering further “black-box-inspired” selling. Others, however, feel that markets are already at or near their point of maximum pessimism, and may be primed for a significant surprise rally in coming weeks.

Check Fund Library’s Market Activity page regularly for active updates on key market indexes and commodities.

@FundLibrary – Follow Fund Library on Twitter for daily information and updates.

Disclaimer

© 2018 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

 
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