Market Update & Important Indicators
The Dow Jones Industrial Average was on track Tuesday for its longest losing streak in nearly a year, while oil prices hovered near $40 a barrel. The blue-chip index's moves marked a reversal from July, when the Dow industrials closed at a record seven times and posted their biggest one-month gain since March. The index has closed down six sessions in a row, falling 0.9% over that time. If it posts losses again Tuesday, it would be the first time the Dow industrials fell seven sessions in a row since August 2015. Many investors have been wary of the stock market's rally, expressing concerns that major indexes' climb to records have been driven by continued support from central banks, as opposed to robust growth in corporate earnings. But some, noting U.S. economic data has on the whole been upbeat, saw the recent losses as a temporary dip. In Europe, stocks closed in negative territory Tuesday as bank shares came under pressure, leading the way lower. The Stoxx Europe 600 fell 1.3% to end at 335.47.
Slumping oil prices and uncertainties over Japan's stimulus package kept Asian traders on the sidelines Tuesday. The Kospi was down 0.5%. The Shanghai Composite was flat while trading was suspended in Hong Kong for the full session as a typhoon shut down the city. Overnight, oil prices fell sharply, briefly dipping below $40 a barrel due to a supply glut. Prices have dropped 22% in less than two months, ending a rally that took prices above $50 in early June. Meanwhile in Japan, the Nikkei Stock Average was down 1.3% as investors awaited details of Prime Minister Shinzo Abe's much-touted 28 trillion yen ($274 billion) stimulus plan, which will rank as the largest supplemental government spending package since the global financial crisis in 2009. But actual new, direct spending will total only about Y7.5 trillion, spread out over two years. That would be less than the Y10 trillion package Mr. Abe introduced in his first year in office. In its latest annual economic report, Japan's Cabinet Office suggested that the government will focus more on fiscal policy and structural overhauls in trying to defeat deflation.
Australian shares fell Tuesday after investors interpreted a reduction in interest rates to a record low as a sign that the economic outlook was murkier than previously thought. The S&P/ASX 200 Index closed 0.8% lower, or 46.9 points, at 5540.5 after the Reserve Bank of Australia reduced its cash rate by one quarter of a percentage point to 1.50%, the first cut since May. The benchmark share index had stood at 5574 prior to the central bank's decision. The result was expected, with financial markets pricing in a roughly 66% chance of a cut prior to the decision. Still, attention focused on the accompanying statement from Gov. Glenn Stevens that appeared to indicate that the RBA has become a bit more concerned about the global economy.
Copper futures closed higher Tuesday on the back of a weaker dollar and higher expectations of economic stimulus from China, the top consumer of the metal. The London Metal Exchange's three-month copper contract was trading 0.32% higher at $4,897.50/t around the time of the PM kerb close Tuesday. Other base metals were mixed. Aluminium closed down 0.6% at $1,615/t, zinc was up 0.3% at $2,272/t, nickel was down 0.1% at $10,684/t, lead was flat at $1,812/t and tin was up 0.7% at $17,991/t.
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