The first trading day of the year did not disappoint for excitement, action and volatility.
PMIs from across the world confirmed the slowdown in the global economy, and once again we saw extreme volatility in the US equity market as the Dow dropped 600 points, rallied back all the way before ultimately dropping again, an 1800 pip or 7.8% round trip.
The catalyst for the final leg down, and a flash crash in currencies, was the after hours announcement by Apple, for the first time in history, about lower sales. CEO Tim Cook said that the slowdown in the Chinese economy in the second half of 2018 had impacted revenues, now revised to $84billion for the quarter ended December, down from an expected $93billion. Apple shares tumbled about 7%, wiping fifty five billion dollars off the company’s value. With Tokyo closed for a holiday there was almost no liquidity as the US closed, and currencies went into a tailspin.
The US dollar dropped more than 300 pips, or 3%, against the Japanese Yen in a matter of minutes, before recovering, as many other currencies lost ground against the dollar. But this paled in comparison against the Australian dollar, which fell 480 pips, an eye watering 6.3% in less than 10 minutes. We still think there is a lot of risk to the global economy, and last night shows us all that no matter how far away they may feel, these events still have the potential to impact business and markets here at home.
As we start what might be a bit of a roller-coaster of a year, do make sure that you lock in your exchange rate with a forward contract to avoid losing money. Speak to your Personal Trader on 020 7898 0541 to find out more.