Asian equities tumbled on Tuesday with risk-aversion sentiments dominating the market.
Rising geopolitical uncertainties, EU political issues, US-China trade stand-off, and big US corporate earnings are the main elements that are weighing on sentiments. Crude oil prices tumbled over 4% last night following Saudi Energy Minister said the kingdom is ready to increase output to maintain a balance in the global oil market. The country currently holds the biggest spare capacity of around 2 million barrels, which is more than sufficient to cover the Iranian output drop as a result of sanctions.
Brent oil slumped over 4% to US$76.4 area, testing a 78.6% Fibonacci Extension level. The immediate support and resistance level can be found at around 74.5 (100%) and 77.3 (61.8%) respectively. Trend indicator SuperTrend (10,2) and 10-Day SMA are both sloped downwards, suggesting short term trend remains bearish.
US S&P 500 index closed 0.55% lower with energy (-2.67%), Industrials (-1.6%) and materials (-1.15%) among the worst performing sectors. The index future erased most of its pre-market losses of the day as investors’ focus shifted to earnings from geopolitical issues.
US earnings are under the spotlight, with technology giants Microsoft, Twitter, Alphabet and Amazon’s earnings due to release this week and they are facing scrutiny of a ‘reality check’ on the sustainability of top line growth. Besides, traditional blue chips including Boeing, AT&T, Ford and Intel will also release 3Q profits this week. Upbeat results will help to alleviate sell-off in Wall Street whereas poorer results will likely do the reverse.
US 10-year Treasury Yield has fallen 3.02 bps to 3.167 percent from a day ago, boosted by haven flows from risk assets. In the longer horizon, an above 3% 10-year yield makes equity investment less attractive than they are before on a risk-adjusted basis. As interest rates continue to rise and treasury yields break multi-year highs, cash and cash-like investments are becoming more valuable, pulling liquidity away from equities. Meanwhile, stock market valuation is pressurised by higher required rate of return as well as rising borrowing costs. That is the ultimate problem markets are facing now.
Crude Oil Brent - Cash
US earnings this week
|McDonald's Corp||MCD US||23/10/2018||Aft-mkt||Q3 18||2.10||Adjusted||1.995|
|3M Co||MMM US||23/10/2018||Aft-mkt||Q3 18||2.58||Adjusted||2.701|
|Caterpillar Inc||CAT US||23/10/2018||19:30||Q3 18||2.86||Adjusted||2.848|
|Texas Instruments Inc||TXN US||24/10/2018||04:01||Q3 18||1.58||Gaap||1.534|
|Boeing Co/The||BA US||24/10/2018||Q3 18||Adjusted||3.489|
|AT&T Inc||T US||24/10/2018||19:00||Q3 18||Adjusted||0.944|
|Microsoft Corp||MSFT US||25/10/2018||04:09||Q1 19||Adjusted||0 96|
|Ford Motor Co||F US||25/10/2018||04:15||Q3 18||Adjusted||0.286|
|Comcast Corp||CMCSA US||25/10/2018||Q3 18||Adjusted||0.61|
|American Airlines||AAL US||25/10/2018||Q3 18||Adjusted||1.134|
|Merck & Co Inc||MRK US||25/10/2018||18:45||Q3 18||Adjusted||1.133|
|Twitter Inc||TWTR US||25/10/2018||19:00||Q3 18||Adjusted||0.132|
|Franklin Resources Inc||BEN US||25/10/2018||20:30||Q4 18||Adjusted||0.737|
|Intel Corp||INTC US||26/10/2018||Bef-mkt||Q3 18||Adjusted||1.153|
|Alphabet Inc||GOOGL US||26/10/2018||Bef-mkt||Q3 18||Gaap||10.434|
|Amazon.com Inc||AMZN US||26/10/2018||04:01||Q3 18||Gaap||3.101|
By Margaret Yang in Singapore
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