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Why Are Global Markets Trading Lower?

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Aug. 3 2016, Published 10:19 a.m. ET

Asian markets broadly lower

Major Asian markets (AAXJ) were trading on a negative note on August 3, 2016. The only exception was the Chinese (FXI) index DJ Shanghai. It rose by 0.24%. The fall in the Asian indexes was led by the Japanese (DXJ) index Nikkei 225—it fell by 1.9%, despite Prime Minister Shinzo Abe announcing fiscal policies worth 28 trillion yen. The negative sentiment was partly due to lower odds for the Fed hiking rates. This made the Japanese yen stronger.

Oceania markets (VPL) were also trading negative on August 3 despite the Reserve Bank of Australia’s monetary policy release—discussed in Part 1 of the series. The Australian S&P/ASX 200 and the Dow Jones New Zealand Index fell by 1.4% and 0.69%, respectively.

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European markets extend losses following the EBA results

The European markets were trading on a downward trajectory on August 2, 2016. The fall was led by the banking sector. The major reason for the sharp fall was the EBA Bank stress test results on July 29. For more details, read EBA Stress Test: More Resilience in the European Banking System. Despite the broadly positive outlook given by the EBA report, the banks that were reported to be weaker had a sharp fall. The Italian bank Banca Monte dei Paschi di Siena fell by over 15% on August 2, while the overall Italian banking index fell by nearly 5%.

Safe haven status takes gold higher

Looking at the performance of sector-based SPDR ETFs on August 2, the SPDR S&P Retail ETF (XRT) led the downfall—it fell by over 2.5%. Among the few SPDRs that went against the negative market sentiment, the SPDR Gold Shares ETF (GLD) rose by 0.81%.

The Energy Select Sector SPDR ETF (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) also posted modest gains after the sharp fall on August 1. They rose by 0.91% and 0.67%, respectively. All of the other major SPDRs were trading negative on August 2, 2016.

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