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Global Markets Sink into the Red

Global markets were broadly in the red after investors had time to digest yesterday afternoon's policy update from the US Federal Reserve, which indicated a slow economic recovery and continued low interest rates. US equities were led lower by tech growth stocks, and European, UK and Asian markets were also down.

US stocks continue downward trend

US stocks opened significantly lower after the Fed's update late in yesterday's trading session suggested more fiscal help would be needed and indicated that interest rates will remain near zero for the next three years, which clouded investor optimism. The S&P 500 (-1.3%) and Nasdaq Composite (-1.8%) each suffered larges losses, while the Dow Jones Industrial Average recovered some of its early losses to sit just -0.9% lower. Financials including Wells Fargo (-2.9%) sank the heavily weighted major technology stocks were again a key contributor for market losses, with shares of Facebook (-3.8%), eBay (-3.5%), Tesla (-3.0%), Netflix (-3.0%), Salesforce.com (-2.7%), Alphabet (-2.6%), Amazon.com (-2.6%), Palo Alto Networks (-2.5%), Apple (-1.8%) and Microsoft (-1.4%) all notably lower. Snowflake dropped -10% following yesterday's strong IPO. Illumina slumped -8.0% amid rumours it wants to pay up to US$8bn to reacquire cancer blood test company Grail four years after it spun it off. General Electric (+3.9%) rose further following yesterday's optimistic CEO update. Energy stocks (-0.5%) including Halliburton (-2.3%) declined despite a lift in oil prices following reports OPEC could hold an extraordinary meeting if prices continue to weaken.

European and UK stocks modestly lower

European shares broke a four-day winning run. The Stoxx 600 lost -0.5%. The ECB's relaxation of bank capital requirements did little to boost bank stocks. Shopping mall giant Unibail-Rodamco-Westfield plunged -10.0% after announcing a capital raising.

The UK's FTSE 100 ended the day -0.5% lower, weighed down by major banks and investment stocks, but came off intra-day lows after the pound fell following news that the Bank of England flagged it is considering a shift to negative rates. AstraZeneca added +1.2% after agreeing to acquire Dogma Therapeutics. Fashion retailer Next (+4.1%) upgraded guidance for the second time this year.

Asia Pacific markets broadly in the red

Asian markets followed the US lower, with the Hang Seng (-1.5%), Kospi (-1.2%), Nikkei 225 (-0.7%) and Shanghai Composite (-0.4%) sinking into the red. Japan's new PM confirmed he will maintain his predecessor's Abenomics policies.

Australian equities reversed yesterday's gains, with the ASX 200 losing -1.2% as weak iron ore prices dragged miners lower, despite a strong set of employment numbers.

Despite New Zealand posting its largest quarterly drop in GDP on record due to COVID-19 enforced lockdowns, the NZX 50 managed to limit losses to just -0.3%. Heartland Group (+5.9%) was among the top performers after posting a solid result.

Crude up while gold and iron ore down

WTI crude oil climbed +2.6% to US$41.14, while gold fell -0.7% to US$1,944.81 and iron ore lost -US$2.00 to US$126.01/MT.

NZ Headlines

Wool and carpet maker Cavalier (CAV) has received a fillip from a population unable to travel and therefore spending up on their homes: total carpet volumes in New Zealand are up more than +7% and sales revenue up +10% in the financial year to date.

Bank and reverse mortgage specialist Heartland Group (HGH) has reported a -2.2% drop in profit for the year to June 30. This includes an extra provision of NZ$9.6m for potential credit losses as a result of the COVID-19 pandemic.

The NZ Shareholders' Association does not support the takeover of Metlifecare (MET), and will direct proxy votes against the scheme of arrangement. Shareholders are due to vote on the takeover by Asia Pacific Village Group at midday on October 2 at an online meeting (with a physical meeting in Auckland if COVID-19 restrictions ease).

Today's Events

  • Fonterra FY20 result
  • Tourism Holdings FY20 result