Tech Stocks Hit Hard

The US stock market was rattled last night when North Korea claimed the US had declared war on it and it would therefore respond by shooting down any US jets that come close to North Korean airspace. In response, the US stated that it has not declared war on North Korea and any suggestion to the contrary is ridiculous. Although the Dow Jones and S&P 500 were both down, they were only down around 0.2% each. The bigger move came in gold which spiked back above $1,300 per ounce to close at $1,310. The size of the move in Australian dollars was even larger as the AUD dropped relative to the US dollar. The AUD gold rate is currently $1,648, jumping around $20 overnight. The AUD/USD has now retreated from the $0.80 level and is now closer to $0.79.

Tech stocks suffered a significant sell-off last night with Netflix one of the worst hit, declining 4.7%. Facebook was also down over 4%. Amazon didn't escape the sell-off but only closed down 1.6%. There wasn't an obvious catalyst for the declines although it may have been the general risk-off sentiment resulting from the North Korean tensions.

Oil had a strong rally overnight as the Kurds voted for independence from Iraq. In response, Turkey has threatened to cut the region off from the oil pipeline infrastructure needed to transport oil out of Northern Iraq (where the Kurds are located). This has the oil market concerned that a supply shock may occur as the Kurdistan region has significant amounts of oil production. Also fuelling the oil rally is data showing that OPEC had over 100% compliance on the agreed production cuts last month. This is a significant turnaround from the less-than-perfect compliance in prior months. WTI oil is currently trading at $52.10.

S&P ASX 200 futures are pointing to a slightly higher open this morning.

Data Releases:

–    No Significant Data

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.