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The stock markets across the world plunged on Tuesday, Nov 20, after – the Dow Jones Industrial Average fell 550 points, in terms of, valuations. The S&P 500 lost 48.84 points and Nasdaq lost 119.65 points. Energy stocks and oil was at one year lows. Ahead of Christmas the retail stocks were down for the second day – which led to loss of 2018 gains. This has been one of the biggest drops since 1991 and just 1 per cent above the 2008 valuations. Energy stocks were 7 per cent down after four day gains due to recent sell off of crude futures, amidst concerns over a number of eco- political reasons. There were concerns over US –Sino trade agreements and future trade deals -the way it will be decided during the meeting between US president Donald Trump and Chinese President Xi Jinping at G20 next week.
Tech stocks were down on weaker demands. iPhone stock was 24 per cent down from highs and the Faang group of stocks lost more than $1 trillion from the recent highs.
This has been one of the lowest points during the governance of US president Donald Trump, almost 8 per cent low, in comparison to, the Election Day, but experts suggest the drop in valuation is not long term as the consumer saving rate is high and there has been a rise in productivity, which can lead to a rebound.
Experts believe the markets will rebound but there are risks where the investors may not get the traditional rebound as the absolute valuation is not low and the elements responsible for such rebounds are disappearing such as strong labor market, tariffs, corporate profit margins, interest rates etc. A strong labor market and tax on imports can cause inflation leading to reduced profit margins. Investors are worried over growing interest rates, peaking corporate earnings and global growth slowdown.
The analysts believe there were abnormally positive conditions in market in the last few years and now the conditions are expected to get back to normal. In 2017, the stocks were going almost straight up and now, it is expected to get steady.
Asian currencies gain
Greater China markets gained on Wednesday, followed by the comments from US that said Beijing has failed to change the unfair trade practices – which was the key reason for the clash between two leading economies of the world. The statement was released after the U.S. Trade Representative's investigation in China that releases updates on intellectual and technology transfer policies –the key reason for the trade war. Such reports were released just before the meeting at G20 in Argentina on Nov 30 and Dec 1.
Many Asian markets such as Japan’s Nikkei, Australian stock market and South Korean markets suffered losses during the day trade and Asian currencies such as Yen gained against dollar. Comments over Fed global economic outlook which suggested the pace of interest rate hike will be slowed, led to decline in dollar.
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