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Global stocks test investor nerves in roller coaster ride

Global stocks test investor nerves in roller coaster ride

Business Desk European equities gained and Wall Street couldn’t make up its mind Friday as stock markets zig-zagged towards the year-end finishing line with dizzying volatility. Led by the US market’s roller coaster ride, equity trading during Christmas week has not been for the faint-hearted — or anyone hoping that markets could still somehow eke out gains for 2018. “The final trading week of 2018 has been explosively volatile and wildly unpredictable,” said analyst Lukman Otunuga at FXTM. “Global sentiment repeatedly swung from extremely bearish to bullish this week as investors tussled with concerns over slowing global growth, US-China trade developments, Brexit-related uncertainty and a partial US government shutdown.” Frankfurt ended its final, shortened session of the year with a 1.7 percent gain, which eased some of the pain from a whopping annual loss, but even so, the Dax index still down by 18.3 percent for the year 2018. Other European stocks also closed higher, building on the previous day’s late surge on Wall Street after a New York session that analysts at Accendo described as “another stonking stateside see- saw”. Markets were behaving like they wanted to compress a year’s worth of excitement into the space of just a few days, they said, making for “a surprisingly volatile end to the trading year”. New York saw a choppy session, opening higher, but then bouncing back and forth between positive and negative territory. In the end the Dow and S&P 500 finished modestly lower, while the Nasdaq eked a tiny gain. “This rollercoaster ride is unlikely to stop anytime soon as investors continue to wear emotions on their sleeve,” said Oanda analyst Stephen Innes. Asian indices moved with caution on Friday after days of volatility on global markets failed to boost confidence. But Tokyo’s benchmark Nikkei index ended the year with its first annual loss since 2011, trading in negative territory throughout the day. “It’s inevitable that selling emerges after sharp rises like yesterday’s,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Centre. Over the year, Tokyo’s bellwether index has lost more than 10 percent. Asian indices moved with caution on Friday after days of volatility on global markets failed to boost confidence. But Tokyo’s benchmark Nikkei index ended the year with its first annual loss since 2011, trading in negative territory throughout the day. “It’s inevitable that selling emerges after sharp rises like yesterday’s,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Centre. Over the year, Tokyo’s bellwether index has lost more than 10 percent. Star performer gold held close to its highest level for more than six months, as investors sought out the safe-haven investment. The precious metal, which fell below $1,200 an ounce in August, is within striking distance of $1,300. “It is shaping up to be an incredibly positive trading week for gold prices thanks to heightened geopolitical risks and dollar weakness,” added Otunuga. Meanwhile Sao Paolo was the place to look for a glimmer of hope for shares: Brazil’s main stock market closed its final session for the year two percent higher, resulting in a gain of 11 percent for all of 2018. “It’s quite a positive performance for Brazil,” said Andre Perfeito at the Spinelli consultancy. “An isolated case in an international context where most stock exchanges are suffering losses.” Earlier on, Japanese shares surged nearly four percent on Thursday, with investors heartened by Wall Street’s best performance in nine years after the White House said Fed Chair Jay Powell would not be fired. Asian markets followed Tokyo’s lead with most showing gains, giving some welcome relief from a lingering global market downturn. Singapore was up 1.4 percent in afternoon trade, Taiwan gained 1.7 percent and Bangkok rose 0.8 percent. Sydney closed up 1.9 percent. Chinese markets slid after the release of weak economic data, showing that profits in the industrial sector declined 1.8 percent in November. Hong Kong closed down 0.7 percent while Shanghai closed down 0.6 percent. “Thankfully for investors, the relentless selling on the back of risk-off sentiment which prevailed leading up to Christmas has mercifully halted… with the Dow surging over 1,000 points while adding the most significant points gain in history,” said Stephen Innes, head of APAC trading at OANDA. Wall Street stocks roared back to life in post- Christmas trade on Wednesday, shaking off four straight routs following strong retail sales data and White House reassurances that Powell would not be fired. Sentiment also improved after a Bloomberg News report said a US government delegation would travel to Beijing in early January to hold trade talks, the first face-to-face discussion since US President Donald Trump and Chinese President Xi Jinping agreed on a 90-day trade war truce. One notable factor in Wall Street’s monster rally on Wednesday was a record gain in an index of stocks that have the largest bets placed against them by market contrarians. The Thomson Reuters United States Most Shorted Index rose 6 percent, the biggest percentage rise in its six-year history, as some investors moved to cover bearish bets on the 51 stocks in the index, some of which were at their lowest price in years. The gain came as the Dow Jones Industrial Average surged more than 1,000 points in a single session for the first time, in a broad stock rebound that pulled the benchmark S&P 500 index back from the brink of a bear market. “This is a short-covering rally,” said Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee. “The move you see is just everybody trying to get out of these super, super bearish positions that they have been in, that have been easy to make money in,” he said. U.S. stocks have been battered this month by fears of slowing economic growth and worries about a potential conflict between the White House and the Federal Reserve, putting the S&P on pace for its worst December since the Great Depression. “From the day the market opened in December, if you just went short the market every morning, you were making money at the close,” said Antonelli. Short-sellers aim to profit by selling borrowed shares, hoping to buy them back later at a lower price. The rally in heavily shorted names exerted pressure on short-sellers to at least partly cover their bets, analysts said. “The shorts realize that they probably shouldn’t be too greedy here,” said Brett Ewing, chief market strategist at First Franklin Financial Services in Tallahassee, Florida. Several components of the Thomson Reuters United States Most Shorted Index rose sharply from multi- year lows on Wednesday. Shares of home furnishing retailer Bed Bath & Beyond Inc, which on Monday fell to a two-decade low, rose 9 percent on Wednesday. Snap Inc, which dropped to a record low last week, rose 4.6 percent. Shares of California Resources Corp rebounded 22 percent from their lowest since early March. Abercrombie & Fitch Co, another component of the index, rose 10.5 percent. The Dow Jones Industrial Average finished up nearly 1,100 points, or about five percent, with the broad- based S&P 500 also surging five percent. “It was possible that risk appetite wouldn’t recover until after the new year but thanks to the upturns in Tokyo and New York, we are likely to see the new year in with a somewhat brighter mood,” Mizuho Securities said in a note. Many global investors have been unnerved by a variety of factors, including the partial US government shutdown, the US-China trade war and Trump’s ongoing criticism of Fed Chair Powell. But while a sense of relief won out for now, analysts warned that there was still much uncertainty in the market. “Don’t get too comfortable as discussions regarding the various political and policy questions remain hanging in the balance,” said Innes. US stock-index futures fell as much as 0.7 percent on Thursday, suggesting investors are unlikely to sustain Wednesday’s rally when US markets open. Kyle Rodda, a Melbourne-based market analyst at IG Group Holdings Plc, told Bloomberg News investors “are still nervous about how financial markets and the global economy will go during a cyclical slowdown without central bank support”. The euro remained weak against the dollar after falling in New York. Mizuho Bank said: “Many market players expect the dollar would likely drop against the yen early next year as factors that could fuel risk aversion or prompt dollar selling are lining up.” They include risks of a no-deal Brexit, the February 28 deadline for the Trump administration in trade talks with China and chances that the Federal Reserve would pass on a rate hike expected in March, it said. Meanwhile, oil markets lost some of their gains as crude prices slid Thursday, after jumping nearly nine percent Wednesday to mark the biggest gain in more than two years. Gold has also been soaring and was set for its biggest monthly gain in almost two years, with investors seeking safe havens amid the partial US government shutdown and concerns about the global political and economic outlook. In early European trading on Thursday, London and Paris opened up 0.4 and 1.4 percent respectively, while Frankfurt fell nearly 0.3 percent after the holiday break. Earlier on Wednesday, The Dow Jones Industrial Average surged more than 1,000 points for the first time on Wednesday, leading a broad Wall Street rebound after a report that holiday sales were the strongest in years helped mollify concerns about the health of the economy. Following Wall Street’s worst-ever Christmas Eve drop in the previous session, the advance was also fueled by investors’ reversing bets against a wide range of stocks. By the close, the Dow, S&P 500 and Nasdaq had notched their largest daily percentage gains in nearly a decade.(Inputs taken from agencies)

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