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The U.S. equity market was in a tailspin on Monday after Hillary Clinton, U.S. presidential candidate, went on a Twitter frenzy and sent out a tweet about “outrageous” price gouging by a pharmaceutical CEO and caused the S&P 500 biotech and healthcare sectors to crash. Short-sellers saw opportunities and took the rest of the S&P 500 sectors down and wiped out billions of dollars from U.S. retirement accounts. Luckily, buyers stepped in and pushed the market higher or the Asian markets would have seen more red on Tuesday. The lesson to be learned is to use tweets wisely, because they can sometimes cause more harm than good.
The VW scandal dragged the DAX down almost 8% on Monday and Tuesday. The whole European automobile sector practically collapsed. Deutsche Bank trimmed the year-end target for the DAX to 10,300, from a previous forecast of 11,300, citing a huge headwind from the auto sector, which makes up about a 25% market cap contribution to the German blue chips index.
If you think, “why should I care?”, think again. The damage has already spilled over into the U.S. equity and emerging markets, as some VW part-makers are in India. In February, Volkswagen got Thai government approval for a plant near Bangkok to produce 300,000 fuel efficient cars a year.
The Asian Development Bank cut their growth forecasts on Tuesday for China to 6.8% this year, down from 7.2%, blaming weaker exports and investment. The bank also revised growth for India downward to 7.4% in 2015, from an earlier estimate of 7.8%. Caixin/Markit China Manufacturing PMI for September came in on Wednesday at a six-and-a-half year low. U.S. Manufacturing PMI for September registered at 53, in line with forecasts, but it is the lowest since October 2013.
Technically, the SET is still on track for a breakout at the 1,390 level, as the index bounced off the lower trendline support of a symmetrical triangle chart pattern. The SET successfully retested the closing low on September 9 at 1,370.65, on the higher low (H-L) chart pattern. There are still some headline risks ahead, as Fed Chair Janet Yellen will be speaking tomorrow at the University of Massachusetts
Amherst.
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