Dubai: The record rally seen in US equities since the start of the year now is on a shaky ground.
The Dow Jones Industrial Average closed 0.09 per cent to be at 25,450.24, after losing more than 2 per cent since the start of the week, marking its second weekly decline.
The index had been on a gaining streak since the start of the year with 9 per cent gains. The S&P 500 index closed 0.21 per cent lower at 2,743.07, after shedding 2.16 per cent gains in the past five session. Traders were selling or booking profits after surprisingly weaker than expected jobs data and slower than expected growth in China and Eurozone.
“I think this (weak jobs report) would set the tone this week. We would see cautious behaviour from traders. We have more negatives than positives in my opinion, There would be no rush to buy and sell. The bulls and the bears will take the initiative,” Nadi Bargouti, Managing Director — Head of Asset Management at Emirates Investment Bank told Gulf News. So far the bulls have been in control of equity markets on the back of growing US economy, and better than expected earnings in 2018 and a dovish Federal Reserve, from whom analysts expect two rate hikes in 2019.
However, concerns about slowing Chinese economy and mixed signals from the jobs report are coming to the fore, impacting investor sentiment.
“We have mixed signals and there are more negatives than positives. We recently shuffled between equities. We are hedging our exposure to equities. We don’t want to give up any potential performance. We think we have more downside risk than upside,” Bargouti said.
Elsewhere, Chinese equities continued its gaining streak. On Friday, the Shanghai Composite index closed 4 per cent lower at 2,969.86 after losing half a per cent since Monday.
“The relative valuation case remains compelling (for emerging market equities), with most valuation metrics close to one standard deviation below their respective historical means. We would still argue we should look expensive versus history given the improved composition of the universe, which favours higher quality names,” Krishan Selva, client portfolio manager, emerging markets equities at Columbia Threadneedle said.
Chinese main equity index, which has gained 19 per cent since the start of the year, has been outperforming the Dow Jones index.