“There are so many forces weighing against markets right now, whether it’s the China slowdown, weak European data, Fed hikes, uncertainty around trade and now Brexit as well,” Bilal Hafeez, head of fixed-income research for EMEA at Nomura, told Bloomberg TV. “We really need to see some stabilisation in any of those factors to see markets stabilise now.”

RBA deputy governor Guy Debelle said an interest rate hike was still “some way off”. He also said the bank was in uncharted territory when it came to falling house prices and could only wait to see what happened with weaker than expected consumption data.

Capital Economics on Australian economic data: “The 0.3% m/m rise in retail spending in October means that household spending isn’t falling off a cliff just yet, but we still think that the downturn in the housing market will restrain consumption growth before long. Meanwhile, the narrowing of the trade surplus in October suggests that net trade may become a drag on GDP growth in the fourth quarter.”

US jobs data showed the addition of 179,000 jobs in November, which was short of consensus estimates of 195,000. A separate report showed initial claims for unemployment benefits fell to 231,000 last week, said LPL Financial Research in a market note. “While lower-than-expected payrolls growth and an uptick in claims may sound worrisome, investors place more emphasis on the nonfarm payroll data, and job creation levels of less than 150,000 amid a very tight labour market at this point in the cycle remains encouraging.”

Today’s Agenda

Local data: AID perf. of construction November

Overseas data: China PPI, CPI and trade November; Euro zone German industrial production October; US non-farm payrolls change November; US rate November, unemployment rate November, average hourly earnings November and consumer credit October.

Market Highlights

SPI futures down 51 points to 5606

AUD -0.7% to 72.13 US cents

On Wall St at 12.09pm in New York: Dow -2.38% S&P 500 -2.27% Nasdaq -1.30%

In Europe at 5.15pm in London: Stoxx 50 -3.3% FTSE -3.1% CAC -3.3% DAX -3.5%

Gold at 12.02pm in New York +4.5% to $US1247 an ounce

Brent crude -2.4% to $US58.66 a barrel

Iron ore -1.1% to $US66.59 a tonne

LME aluminium -1.7% at $US1,936 a tonne

LME copper -1.7% down at $US6,070 a tonne

10-year yield: US 2.86% Australia 2.45% Germany 0.23%

From Today’s Financial Review

Hayne pain for banks is lawyers’ gain: The banking sector’s Hayne pain has been the legal sector’s gain, with The AFR law partnership survey revealing the commissioner to be the number-one boost for business in 2018.

Debelle: Rate hike ‘some way off’: The deputy governor of the Reserve Bank says the market’s anticipated hike is “some way off”, and if the economy deteriorates, it can always keep cutting.

Chanticleer: Gary Helou’s ultimate humiliation: There are a number of important lessons to be learnt from Gary Helou’s outrageous behaviour when managing director of the Murray Goulburn Co-operative that this week resulted in him being fined $US200,000 for false and misleading conduct under Australian Consumer Law

United States

US stocks slumped for a second day as the sell-off in risk assets persisted amid concern that the rate of global economic growth has peaked. The S&P 500 fell as much as 2.9 per cent and losses in the Dow Jones Industrial Average topped 750 points before major averages bounced off of key technical levels. Technology measures stormed back, with IBM and Intel the only Dow components higher on the day.

Apple, Amazon and Facebook all declined by more than 2 per cent. Apple’s tumble came as analysts from UBS cut their price target for the stock, citing survey data that showed declining consumer interest in iPhones. However the tech-heavy Nasdaq indexes all but erased a rout that reached 2.4 percent as the FAANG cohort turned positive.

The latest losses put the S&P 500 and the Dow back into the red for the year. The Nasdaq was still slightly higher for 2018. “The market seems right now to be focused on increased risks for a 2020 recession,” said Patrick Schaffer, Global Investment Specialist, J.P. Morgan Private Bank. “It’s a very hard market to buy when you see really strong signals that we are indeed late (in the economic) cycle.”

Volatility has more than doubled this year from near historic lows in major exchange-traded funds tracking US equity indexes and sectors, bringing it closer to long-term averages, Goldman derivative strategists Katherine Fogertey and John Marshall wrote in a note. Overall, single-stock options prices imply a continuation of those levels in 2019, which are “not extreme by any means,” they wrote.

“From the perspective of the larger economy, I don’t see the recent spike in volatility as a big deal,” said Jared Bernstein, former chief economist to ex US vice president Joe Biden, in a column for the Washington Post. “Somewhere in the noise is a signal reflecting the likelihood that growth and corporate profitability and likely to slow later next year, and that matters.”

Europe

Investors in British stocks can wave goodbye to index gains of the last 18 years. The FTSE hit a two-year low while the Stoxx Europe 600 has lost as much as $US1.4 trillion in market value since the end of September as fears of rising US interest rates and slowing economic growth fueled the sell-off.

The FTSE fell 3.2 percent to 6674.01 points, its worst performance since June 2016, when Britons voted to leave the European Union. The midcap FTSE 250 was down 2.8 percent with domestically focused stocks slightly less affected than the wider European market before the Brexit vote next week.

The DAX in Germany dropped 3.9 percent, while France’s CAC 40 lost 3.7 percent.

“Santa will ride on a bear this year,” said Guillermo Hernandez Sampere, head of trading at the German asset manager MPPM EK. “We need to accept the negative sentiment. Any newsflow is used to sell the market.”

Volatile politics and slowing economic growth have sparked $US62 billion of equity outflows from Europe this year, the worst performance of major regions.

Deutsche Bank shares slid by 4 per cent to a new historic low, dealing a fresh blow to CEO Christian Sewing’s bid to stabilise the bank after three years of losses under previous management. The slide came as the Financial Times reported it had processed €31 billion more in questionable funds for Danske Bank than previously thought.

Asia

Sharp losses in technology shares pulled down benchmark stock indexes in China and Hong Kong on Thursday, after the global chief financial officer of Chinese technology giant Huawei was arrested in relation to alleged violations of US sanctions.

The news sent shares of technology companies and hardware suppliers tumbling. CSI300’s sub-index for IT stocks slid 3.4 per cent. The wider CSI IT index was down 3 per cent, while the CSI’s All Share Telecom index lost 4.5 per cent.

In Hong Kong, the Hang Seng’s IT hardware index fell by 3.5 per cent, having been down 4 per cent at one point, whereas the sub index for tech firms shed 4.4 per cent. The index pared back the loss to close down 2.5 per cent, the largest one-day per centage drop since October 23.

The tech rout and renewed trade worries pulled the Shanghai Composite index down 1.7 per cent to 2,605.18 points, while the blue-chip CSI300 index fell 2.2 per cent.

“It is [US allegations of Chinese] technology transfer that people really worry about,” Patrick Yiu, managing director at CASH Asset Management in Hong Kong said. “In comparison, the trade deficit issue is not that difficult to resolve.”

Currencies

The dollar weakened against major peers as US Treasury yields tumbled and traders scaled back expectations on the number of rate hikes the Federal Reserve would implement amid weakening economic data and heightened market volatility. The dollar propped up the pound – sterling was 0.43 per cent higher.

The euro was 0.33 per cent higher against the dollar at $US1.1382. The Canadian dollar fell against its US counterpart to a nearly 18-month low, as Bank of Canada Governor Stephen Poloz said the economy was weaker than forecast and predicted low oil prices would cut growth.

The benchmark 10-year Treasury yield hit a three-month trough of 2.845 per cent. It was last down 7 basis points at 2.851 per cent. “I think it is essentially a yields story for the US dollar today,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. “The problem for the dollar is really a decline in US yields and fading Fed expectations.”

Yields on top-rated German government bonds tumbled to new six-month lows, as a global equity selloff and a renewed slide in oil prices sent investors scurrying for safe-haven assets.

US 10-year yields also slipped to three-month lows as traders scaled back expectations on the number of rate hikes the Federal Reserve might be able to deliver amid weakening economic data and trade conflict.

Bund yields are at their lowest since a rout in Italian bond markets in May, reflecting trade tensions, the growth outlook and next week’s Brexit vote. Ten-year yields have fallen eight bps so far this week, putting them on track for the biggest weekly fall since late-October.

Bitcoin’s slump accelerated, with the largest cryptocurrency approaching another fresh low for the year. The digital token dropped as much as 4.7 per cent to $US3,549, and is flirting with the prior 2018 low of $US3,522 set on November 26. Bitcoin reached a record high of almost $US20,000 in December 2017.

Commodities

Most industrial metals prices fell and copper hit a three-week low. Gold rebounded to a near 5-month peak as the dollar declined amid expectations of a slowdown in the pace of US rate hikes, with investors seeking refuge from a sell-off in global stocks.

Spot gold rose 0.3 per cent to $US1,241.15 per ounce at 11:01am in New York, having reached $US1,244.32 per ounce, its highest since July 17. US gold futures were 0.3 per cent higher at $US1,246.60 per ounce.

“What we are seeing is a lot of safe-haven support with the equity markets selling off, coupled with a weakness in the US dollar,” said Alex Turro, market strategist at RJO Futures.

Meanwhile, palladium dropped after outshining the yellow metal for the first time since 2002 on Wednesday. Spot palladium slid 4.28 per cent to $US1,190.30 per ounce after rising to an all-time high of $US1,263.56 in the previous session.

The arrest of tech giant Huawei’s finance chief for extradition to the United States cast doubt over the US-China trade truce and hit metals because investors fear tariffs will curtail China’s demand for commodities.

Benchmark copper on the London Metal Exchange (LME) ended 1.7 per cent down at $US6,070 a tonne after touching its lowest since November 14 at $US6,068.

The Huawei arrest had combined with a plunge in oil prices to turn investors negative on metals, said Capital Economics analyst Ross Strachan. “The optimism in the markets at the beginning of the week evaporated extremely quickly,” he said.

Healthy supply-demand fundamentals, however, meant copper was unlikely to fall much further, he added, predicting a price of $US6,250 a tonne at the end of 2019.

LME aluminium closed 1.7 per cent down at $US1,936 a tonne, zinc ended down 1 per cent at $US2,593, nickel fell 3.3 per cent to $US10,850, tin finished 1.3 per cent lower at $US18,925 and lead eked out a meagre gain of 0.1 per cent to $US1,984.

Australian Sharemarket

Australian shares rallied from a near-two year low for the second day in a row on Thursday as trade fears and bond markets kept investors on edge. The S&P/ASX 200 Index slid 10.7 points, or 0.2 per cent, to 5657.6 while the broader All Ordinaries closed 12.4 points, or 0.2 per cent, lower at 5726.7.

“There a several separate factors conspiring to keep markets on edge at present, including a flatter US yield curve and trade tensions,” said BetaShares Capital chief economist David Bassanese.

The heavyweight mining stocks led the market losses, following a mixed session for commodities. BHP fell 1.4 per cent to $US31.40, Rio Tinto slid 2 per cent to $US72.21 and South32 closed 3.4 per cent lower at $US3.12.

Street Talk

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with Reuters, Bloomberg, AAP

Comments? Questions? Let us know what you think of Before the Bell: natasha.rudra@fairfaxmedia.com.au

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