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Global Market Report - December 28

World markets rallied on Friday after Wall Street's late rise, but Japan has closed the year with the first annual loss in seven years

Morningstar 02/01/2562

Global Market Report

Asia

Markets in Asia-Pacific have been buffeted by the volatility in US equities this week, most notably with the 5% slide in the Nikkei on Tuesday.

China and Japan have had an uninterrupted week of trading, unlike Hong Kong’s stock market, which was closed on Tuesday and Wednesday. The Shanghai Stock Exchange is closed on Monday.

The Shanghai Composite Index entered a bear market in the summer and has struggled since, with the US-China trade war intensifying. It is now down just over 25% for the year.

Even recent signs of progress in trade talks between the two countries have failed to lift prices. The index started the year at 3,348 points and ended at 2,493, the lowest since late 2014 – just before the stock market overheated and Shanghai rocketed to 5,000 points and abruptly collapsed.

Japanese stock markets are closed on Monday, so this is the first developed stock market to have a final tally for 2018. The Nikkei index made its first annual loss for seven years, starting at around 23,500 points and closing at just above 20,000, a loss of around 15% in 2018. On December 25, the Nikkei lost 5%, a fall of over 800 points, taking the index to 19,350. This dramatic move downwards dragged the Nikkei into bear market territory, joining the S&P 500.

Europe

The Frankfurt Stock Exchange is closed on Monday so this the last trading day for the DAX, which like other global markets, has had a year to forget. Sentiment on European stocks has soured after a decent few years of gains. Despite a near 2% gain so far this year, Germany’s DAX is off nearly 18% this year.

The FTSE 100 is off nearly 13% or around 1,000 points this year despite sustained weakness in sterling, a factor that has previously helped the dollar earners of the index since the 2016 EU referendum.

Wall Street’s late rally helped lift the UK index out of doldrums in early trading but the index is still below 6,700 points.

North America

US stock markets were closed on Tuesday, but this week has been dramatic enough with only four trading sessions. The weekend’s “emergency” phone call between Treasury Secretary Steve Mnuchin and Wall Street banks set the scene for sharp fall on Monday for the Dow, which lost 653 points. Wednesday’s record 1,000 point gain baffled market observers, not least because a sharp fall at the open on Thursday led to suspicions that this was a “sucker’s rally”. A 1,000 point is such an outlier that more murky theories began to emerge on social media.

The consensus of sorts held that the bull market was not “back on course”. The Dow Jones has swung from nearly 27,000 points in early October to below 22,000 points in late December.  But it is off just under 7% taking the starting points level of 24,824 in early January to around 23,000 points now. The S&P 500 is off around 7.5% for the year so far.

While the losses this year compare unfavourably with 2017 and 2016’s gains, the extreme volatility in recent weeks is creating the impression that the market is tanking.

The Dow soared late in the trading session on Thursday despite a sharp fall at the open.

 

 

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