IG Markets - Afternoon thoughts

IG Markets - Afternoon thoughts

Across Asia, regional markets have started the new week mostly lower following the sharply weaker leads from Wall St. The Nikkei 225 is the weakest, down 2.9% while the Hang Seng and Kospi are 1% and 0.4% softer respectively. On the upside, the Shanghai Composite is bucking the trend, stronger by 1%.

In Australia, the ASX 200 is 1.4% weaker at 4363, off morning lows of 4345. The disappointing consumer sentiment data in the US, as well as weaker-than-expected revenue results from Citigroup and Bank of America are really weighing on the local market. All sectors bar healthcare are firmly in the red, with the industrial, consumer discretionary and financial names leading the way lower.

We’ve seen a very light day’s trade in terms of volume, with school holidays in NSW still continuing and Japan observing National Marine Day. There’s very little confidence around at the moment. The improving confidence and sentiment seen last week has been eroded by the big jump in downside volatility on Friday evening.

There’s too much uncertainty – in the US its corporate earnings and economic data while domestically, it’s the election and nervousness before the upcoming earnings season. Following Friday’s disappointing reports from Bank of America and Citigroup, growth concerns have begun to reemerge. Of 23 companies that have already reported, revenues have only grown by 2.5%. Once again, it looks like corporates are beating bottom line expectations through cost cutting efforts, rather than actual growth, which is clearly very worrying to the market.

ENDS

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