The Sydney Morning Herald: ASX set for heavy falls as Wall Street dives on recession fears
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Please find below a recent article from The Sydney Morning Herald:
“Wall Street stumbled on Wednesday as investors fled equities for safe-haven assets, seeking shelter amid gathering signs that a recession could be on the horizon.
All three major US indexes were sharply lower as short and long dated Treasury yields inverted for the first time in 12 years, a potential signal of imminent recession.
Elsewhere ominous indicators suggested a faltering global economy, hobbled by the intensifying US-China trade war, Brexit jitters and geopolitical concerns. Germany reported a contraction in the second-quarter GDP, and China’s industrial growth in July hit a 17- year low.
The Australian share market is set to follow suit this morning with futures at 5.05am AEST pointing to a fall of 113 points or 1.7 per cent, at the opening bell.
"Every central bank around the world is trying to prop up economies and every politician around the world is trying to destroy economies," said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York.
"What's happening in Hong Kong, what's happening with Brexit and the trade war, it's all a mess."
Yields for 2-year and 10-year Treasuries inverted for the first time since June 2007, months before the onset of the great recession, which crippled markets for years.
Such a yield inversion is held by many as a traditional harbinger of recession.
"When you're in an ultra-low interest rate environment as we've been, you've got to ask if the old metrics still apply," Pursche added. "My guess is yes."
The CBOE volatility index, a gauge of investor anxiety, jumped 4.26 points to 21.78.
Spot gold prices rebounded, rising over 1 per cent as market participants fled stocks for the precious metal.
The Dow Jones Industrial Average fell 653.29 points, or 2.49 per cent, to 25,626.62, the S&P 500 lost 71.78 points, or 2.45 per cent, to 2,854.54 and the Nasdaq Composite dropped 216.34 points, or 2.7 per cent, to 7,800.02.
All of the 11 major sectors in the S&P 500 were in the red, with energy and financial suffering the largest percentage loss.
Interest rate-sensitive banks fell 4.1 per cent.
Tariff-vulnerable chipmakers were also firmly in negative territory, with the Philadelphia SE Semiconductor index down 3 per cent.
Macy's shares plunged 11.5 per cent after the department store missed quarterly profit estimates and cut full-year earnings estimates.
Macy's peers Nordstrom and Kohls slid 10.2 per cent and 11.2 per cent, respectively.
A US House of Representatives oversight panel called on Mylan NV and Teva Pharmaceutical Industries to turn over documents as part of a review into generic drug price increases.
Mylan shares fell 7.9 per cent while Teva dipped 9.2 per cent.
The second-quarter earnings season approaches the finish line, with 454 of the companies in the S&P 500 having posted results. Of those, 73.1 per cent beat Street estimates, according to Refinitiv data.
Analysts see S&P 500 second-quarter earnings growth of 2.8 per cent year-on-year, per Refinitiv.
Declining issues outnumbered advancing ones on the NYSE by a 4.35-to-1 ratio; on Nasdaq, a 5.19-to-1 ratio favoured decliners.
The S&P 500 posted eight new 52-week highs and 51 new lows; the Nasdaq Composite recorded 19 new highs and 242 new lows.
Keeping you updated,
BRI Customer Solutions Team
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