Global stocks ended the week with a thud on Friday as investors second-guessed the US Federal Reserve’s landmark interest rate hike and focused again on the oil rout.
The losses were broad in terms of geography, with bourses in Japan, Europe and New York all tumbling to conclude a topsy-turvy week on a sour note.
Friday’s trade marked an extension of Thursday’s US session, where stocks also fell sharply one day after the Fed lifted interest rates for the first time in almost a decade. The market has been rethinking whether the initial wave of optimism about the Fed was overbaked.
“While Wednesday’s Fed rate hike removed one cloud of uncertainty from the markets ... speculation about when the next one is likely to occur is not expected to remain too far away,” said Michael Hewson, chief market analyst at trading group CMC Markets UK.
Oil prices fell to fresh multi-year lows as a continued supply glut weighed on the commodity and petroleum-linked stocks.
“Overall, the market is still trying to digest two things,” said David Levy, portfolio manager at Kenjol Capital Management.
“We still have in mind the price of oil as well as the long-term ramifications of what the Federal Reserve is trying to do,” Levy added.
In the US, the biggest losses came in the Dow Jones Industrial Average, which shed 2.1 percent, with big companies including Apple Inc, Boeing Co, JPMorgan & Chase Co, Procter & Gamble Co and Microsoft Corp all losing between 2.7 percent and 4.1 percent.
Another Dow company, Walt Disney Co, fell 3.8 percent despite setting a record US$57 million in opening-night ticket sales for its blockbuster Star Wars: The Force Awakens.
NOT ENOUGH?
BTIG downgraded the stock, saying the strong performance of the movie will not be enough to offset weakness in Disney’s ESPN division.
Next week’s economic calendar is relatively light ahead of the Christmas holiday on Friday, when markets are closed. Investors will be keeping an eye on key data, including economic growth figures and existing-home sales, after the Fed rate move boosted hopes the world’s top economy was back on track.
“Investors are keen to confirm the health of the US housing market,” Nomura Securities said in a commentary.
In Argentina, stock prices plunged by more than 4 percent after a week of shock economic reforms by the newly elected conservative government.
Buenos Aires’ key Merval stock index closed 4.47 percent lower at the end of the week’s trading, at 11,404.56 points.
It recovered some of its earlier losses after plunging by 6.28 percent an hour before the close. It was down by 10 percent overall on the week.
The turbulence came a day after the Argentine peso currency plunged by 30 percent due to the scrapping of US dollar exchange restrictions.
Financial media cited investor uncertainty about the impact of reforms by business-friendly Argentine President Mauricio Macri in his first week in office.
Eduardo Blasco, an analyst at consultancy Maxinver, dismissed any link to the US dollar change however.
“The fall is due to international markets performing badly and to profit-taking” by investors cashing in earlier gains, Blasco told reporters.
“When things are this volatile it is best to analyze in the medium term,” Blasco added.
On Thursday, the peso weakened sharply against the US dollar as it floated freely on the market for the first time since 2011.
The US dollar changed hands for about 14 pesos on Thursday and the rate eased slightly on Friday to US$13.6 dollars.
That was still high above the official fixed rate of US$9.84 to the peso on Wednesday before the fixed rate was scrapped.
‘NECESSARY’ MOVE
Macri says the sharp peso adjustment is needed to boost the nation’s economy, though economists, as well as his political opponents, warn it will hurt Argentines’ purchasing power in the medium term.
The currency reform was the most dramatic of Macri’s measures since taking office on Thursday last week.
He axed a controversial tax on agricultural exports including grain and meat and lowered the tax on soybeans, a major export.
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