The brutal Wall Street rout last night broke heavily across Asian selling today with the Japanese Nikkei falling more than -7% at one point. The worst Nikkei performers were Nippon Electric Glass and Shionogi & Co, down -12.5% and -9.35%. The Hang Seng fell -4.42% and the Shanghai Composite was down -3.21%, its worst one-day fall for two years. There was a more measured response though from the South Korean Kospi, down -1.54%.
Investors continue to be worried about whether the losses are a well overdue correction, or not. Economic fundamentals remain strong in the US which is why the cost of borrowing in the US – well signalled in advance by ex Fed boss Janet Yellen – is on the rise. But it’s the pace of the interest rate rises which is the worry. A US rate rise could hit Asian stocks harder for longer due to more money flowing to the region when US interest rates were lower.
Ironically the market rout – the Dow was down 1,175 points last night, the biggest one-day fall in its history – has been pushed by stronger US economic news. Yet given a +25% rise in the Dow last year, the market exuberance has had many warnings; share price volatility has been conspicuous by its absence – till now. Yesterday the Wall Street fear gauge, the Vix volatility index, soared past 37, well past the share fears experienced globally during the Greek debt crisis in 2014 and 2015.
Gold rose more than +0.67% to 1,345.30 in response. The pound was up +0.21% overnight to 1.3972 and +0.04% higher against the euro at 1.1279; overall the spot dollar price is down -0.13% to 89.56. Cryptocurrencies also came under attack. At 7am Bitcoin was valued at just $6,055.
- UK FTSE 100 7,334.98 -1.46%
- DAX 12,687.49 -0.76%
- CAC 40 5,285.83 -1.48%
- Euro Stoxx 600 382.00 -1.56%
- Dow 24,345.75 -4.60%
- S&P 500 2,648.94 -4.10%
- Nasdaq 6,967.53 -3.78%
- Nikkei 225 21,610.24 -4.73%
- Gold 1,346.10 +0.72%
- Oil WTI 63.51 -1.01%
BP profits gush in
This morning BP announced an annual +139% profits lift to $6.2bn with fourth quarter profits arriving at $2.1bn on a (most accurate) underlying replacement cost basis. The Q4 profits are particularly stark compared to the previous $286m reported. There is no change to the BP dividend at 10 cents a share.
“We delivered operationally and financially,” said BP boss Bob Dudley, “with very strong earnings in the downstream, upstream production up 12 per cent, and our finances rebalanced. And we did all this while maintaining safe and reliable operations.”
However attached to the latest BP numbers was $5.2bn worth of Deepwater Horizon payments though this amount are on a downard trend compard to 2016. WTI futures are down around -1.1% currently, around $3 off 2018 price highs, in part thanks to safe haven dollar flows.
Breaking news: Ocado has seen a pre-tax loss of £500,000 compared to £12m profits for the previous year.