Sharechat Logo

Market barometer: US markets sneeze - we catch a cold

Friday 8th December 2000

Text too small?
Standard & Poor's 500 (weekly data)

The US sharemarket is giving the world the jitters as evidence emerges of a sharp slowdown in the US economy. The Federal Reserve's medicine of higher interest rates has started to take its toll.

Manufacturers report lower capital investment and reduced new orders. Consumer confidence has dropped sharply over the last part of this year. The growth of credit card debt is slowing.

Much has been made of the well-publicised downturn in the information technology sector, but department store stocks are down an average of 30% on an expected weak Christmas period.

The betting is starting to turn toward an easing of interest policy by the Federal Reserve. The next federal open markets committee meeting is set for December 19.

The Federal Reserve may use the meeting to signal a shift from hawkish to neutral on interest rates, with possible cuts in store next year. Already shorter-dated US debt is rallying on firm demand in anticipation of the Federal Reserve move. A rally in fixed income instruments may herald the return of interest to come in sagging equities.

Main US measures are soft. The Dow Jones industrials index is hovering at 10,500 still, but the Standard & Poor's 500 (illustrated) is slumping ominously toward 1300.

The Nasdaq is a slaughterhouse at the 2500 level. Many top high-tech stocks like Microsoft are down 50% or more. The Australian ASX100 is slipping at 2650. At home, the NZSE top-40 capital index is weak at around 1950. Its fortunes are not aided by an unloved Telecom, ailing under sharp resistance at 600cps.

The NZSE smaller companies capital index, formerly a bright spot, has dived back down to the 5000 area. Shares will be softer in New Zealand on both local and overseas interest rate concerns.

A rise in the New Zealand dollar could accelerate any mergers or takeovers in the pipeline while our equities are still cheap for foreign investors.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar falls against Aussie after jobs data there
Sky CEO put on notice by chunky vote against salary share scheme
Unions gearing up to oppose 'market tests' on Fair Pay Agreements
Mandatory farm plans scorned as 'tick box' exercises
Kiwi dollar firms on weak US retail data, capped by rate-cut expectations
17th October 2019 Morning Report
SkyCity hoses down union claims over potential job losses
OPINION: Fair Payment Agreements and 'swallowing vomit' - the lot of the CTU
MARKET CLOSE: NZ shares gain; Restaurant Brands climbs on upbeat outlook
NZ dollar stalls after Bascand's rate cut comments

IRG See IRG research reports