Major sharemarkets around the world slid on Tuesday, while prices for gold and other metals were driven down by a strong US dollar and concerns over China’s weakening economy.
In the US, megacaps and chip stocks led much of the decline while investors assessed subdued factory activity data — which edged up in August from an eight-month low in July — ahead of coming labour reports that could affect the easing of monetary policy by the Federal Reserve.
Tech giant Nvidia (NASDAQ:NVDA) tumbled 9.5%, Alphabet (NASDAQ:GOOGL) was down 3.7%, and Microsoft (NASDAQ:MSFT) lost 1.9% while ongoing chipmaker woes dragged the Philadelphia SE Semiconductor index down 7.8% — its biggest drop since March 2020.
Overall, the Dow Jones lost 1.5%, the S&P 500 dropped 2.1%, and the Nasdaq fell 3.3%.
In Canada, the Toronto Stock Exchange’s S&P/TSX composite index ended down 1.3% — its worst day since 2 August.
Those losses were led by the materials sector, which notched a 4.2% loss as the price of gold dropped and copper fell to a two-week low. The energy sector also dropped 2.1% after news of sluggish economic growth in China forced oil prices down 3%.
China’s manufacturing activity sank to a six-month low in August as factory gate prices fell and owners struggled for orders, according to an official survey cited by Reuters.
Canadian investors will also be closely watching the Bank of Canada’s policy meeting today, during which it is broadly expected to lower its policy rate by 25 basis points for the third time in a row.
“Lending rates are still very high,” Allan Small, a senior investment advisor at Allan Small Financial Group, says.
“So, to me, it’s the start of an interest rate decreasing cycle that will continue going forward, until the Bank of Canada finds that neutral rate, whatever that may be.”
Across the pond, European investors suffered their worst session in almost a month, again brought on by US manufacturing data that raised concerns about a slowdown in global growth.
Stocks in France, Germany, Spain, and Italy fell between 0.9% and 1.3%, also led by the energy and resources sectors, which dropped 2.8% and 3.3%, respectively. Analysts at Commonwealth Bank noted this morning that it was the worst day for Europe’s resources stocks since October last year.
Overall, the continent-wide FTSEurofirst 300 index slid 1%, while London’s UK FTSE 100 index dropped 0.8%, with precious metals miners finishing 3.7% lower.
Indeed, the spot price for gold dropped 0.4% on Tuesday to US$2,490.44 ($3,719.80) — its lowest level in more than a week — thanks to a firm US dollar, which rose 0.2% to a two-week high and made gold more expensive for other currency holders.
“We see evidence that speculative positioning in gold is effectively maxed out for the time being,” Daniel Ghali, a commodity strategist at TD Securities, says.
“I think the level to which gold is seeing pressure from the rise in the dollar reflects our view on positioning.”
Base metals were also affected, with copper and aluminium futures down 2.7% and 2%, respectively, while US iron ore futures remained largely unchanged at US$100.55 a tonne.
Such jolts perhaps reflect a change of pace compared to sharemarket performances over August, which saw the MSCI World index climb 2.5%.
“Investors regained confidence,” Saxo noted in its Market Rewind report yesterday, “pushing equities higher despite ongoing concerns about inflation and central bank policies.”
The global real estate sector led the charge last month, soaring 5.7% as investors flocked to tangible assets for stability, while healthcare continued its strong performance with a monthly rise of 5.4% and the materials sector realised a gain of 1.5%.
Only the energy sector fell, sliding 1.4% as fluctuating oil prices and geopolitical anxieties put a spotlight on the industry’s volatility.
Write to Oliver Gray at Mining.com.au
Images: iStock
