A cautious start for offshore markets later today with the ongoing US-China trade war, worries about the stability of some US financial markets and Brexit likely to hit investor sentiment.
Friday saw Wall Street turn lower after Donald Trump again undermined attempts to stabilise the trade war and the US Federal Reserve made it clear it will continue to inject up to $90 billion a day into US money markets to keep short term interest rates steady.
The fall saw US shares down 0.5% for the week. That was after Eurozone shares rose 0.2% on Friday to produce a week’s gain of just 0.1%. Japanese shares rose 0.4% and Chinese shares fell 0.9% not being helped by weak economic data and a tiny cut in a key interest rate.
Bond yields fell as the Saudi attack and the latest trade war flare up provided a reminder that the risks to the outlook remains uncertain.
Oil prices rose but reversed much of the spike seen in early in the week in the wake of the the attacks on Saudi oil facilities the previous weekend.
Wall Street stocks closed lower Friday, for the first weekly decline in a month, as investors looked beyond central-bank decisions in some major economies (such as the US) of the past week and focused on the China-US. trade war.
A report that a Chinese delegation had canceled plans to visit farms in Montana as a part of its negotiations with the US delegation saw tech and trade facing stocks drag the wider market lower in a reaction to the news which was later confirmed.
Making life more difficult for investors was the so-called end of quarter “quadruple witching day” on Wall Street, the simultaneous quarterly expiration of stock-index futures contracts, single-stock futures, and options on stock-index futures and individual stocks, which often spurs higher volumes.
That passed without too much disruption in as falling market in the last few minutes of the week’s trading.
The Dow lost 160.60 points, or 0.59%, to end at 26,934.19, the S&P 500 index eased 14.89 points, or 0.5%, to 2,991.90, while the Nasdaq fell 65.20 points to finish the week 8,117.67, a fall of 0.8%.
For the week, the S&P 500 fell 0.52%, the Dow lost 1.05% and the Nasdaq dropped 0.72%.
In money markets, the interest rate on US overnight repurchase agreements (repos) slipped on Friday after an operation conducted by the New York Federal Reserve that injected $US75 billion in cash over the weekend.
The Fed also said it would inject up to $US90 billion a day for the next fortnight to help ease tensions that erupted on Tuesday morning when the repo rate soared to more than 10% because of a sudden emergence of a shortage of cash.
By Friday the overnight repurchase agreement (repo) rate was 1.85%-1.95%, compared with 1.90%-2.00% before the latest repo operation and the Federal Funds Rate after last Wednesday’s cut of 1.75% to 2%.
The repo rate had ended at 1.75% late on Thursday after topping 10% on Tuesday.
The Fed’s willingness to provide more liquidity on Friday is “suggesting that the funding tightness evident in the U.S. markets earlier this week has not dissipated,” Scotiabank strategists Shaun Osborne and Juan Manuel Herrera wrote in a research note quoted on Reuters.
