Selling momentum in force but investors ponder sell-off
Selling on international markets sets the scene for another bleak opening on the Australian market.
By Friday’s close, the ASX 200 was down 8.7% from its late August peak. With selling momentum clearly the order of the day, investors are trying to decide if the conditions are right for a major downward move in world stock markets. There have been some changes in recent weeks. The prospect of higher US interest rates has begun to crystalize, the outlook for the European and Chinese economies has softened further, commodity prices are under pressure and geopolitical risks remain elevated.
None of these things however are radically different from two months ago. This leaves investors torn between concern over the warning signs represented by heavy selling momentum and a feeling that world economic conditions have not deteriorated to a level that implies a really major market sell-off.
China’s trade figures will be a key market focus today. Recent months have seen a return to solid export growth which has been a bright spot for China’s economy. Weak imports, however, have pointed towards softening growth in the domestic economy and a run down in commodity stockpiles. Investors will be relieved if the September export figure can continue to show solid growth in the face of slowing growth in Europe.
Friday’s sell-off in the ASX 200 index leaves the downtrend clearly intact. The next significant support levels look to be the lows from last December and February around 5025/5050. Thursday’s high of 5325 is now resistance.
For further comment from Ric Spooner please call 02 8221 2137.
Frequently Asked Questions about this Article…
The ASX 200 is experiencing a downtrend due to a combination of factors including selling momentum, concerns over higher US interest rates, softening economic outlooks in Europe and China, and elevated geopolitical risks. These elements have contributed to the market's decline from its late August peak.
Key factors affecting global stock markets include the prospect of higher US interest rates, a softened economic outlook for Europe and China, pressure on commodity prices, and elevated geopolitical risks. These factors are causing investors to be cautious about potential market sell-offs.
China's trade figures are a focal point for investors, as solid export growth has been a positive sign for China's economy. However, weak import numbers suggest softening domestic growth, which could impact investor sentiment if the trend continues.
Investors should watch the support levels around 5025/5050, which were the lows from last December and February. The resistance level to keep an eye on is Thursday’s high of 5325.
While the selling momentum is strong, investors are divided. Some are concerned about the warning signs, but others feel that global economic conditions have not deteriorated enough to indicate a major market sell-off.
Higher US interest rates could lead to increased borrowing costs, impacting consumer spending and business investments. This, in turn, could affect global markets by slowing economic growth and increasing market volatility.
Geopolitical risks contribute to market uncertainty and can lead to increased volatility. Investors are cautious as these risks can impact global trade, economic stability, and investor confidence.
Commodity prices are under pressure due to factors like softening demand from major economies such as China and Europe. This affects investors by potentially reducing profits for companies reliant on commodity exports, leading to cautious market behavior.
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