In bear markets accompanied by recessions, the S&P 500 has taken an average of about 34 months to recover its prior peak, LPL said.

In bear markets without recessions, the S&P 500’s time to recover its prior peak is shortened to only about 11 months. In the last two bear markets without recessions, the S&P 500 recovered in 3 months (1998) and 5 months (2011), LPL also noted.

In Europe, where trading resumed after the Christmas break, the Euro Stoxx 50 entered a bear market.

The benchmark, which flirted with the level last week, closed at 2937.36, down 21 per cent from a peak in November 2017, following other European indexes including Germany’s DAX and Italy’s FTSE MIB which closed in bear territory this year. The broader Stoxx Europe 600 benchmark also edged closer to a bear market with Thursday’s close only about 2.2 per cent away.

“My medium-term view hasn’t really changed since the weekly chart broke to new lows a couple of weeks ago, with the resulting bearish setup suggesting more downside and offering resistance to any rally,” Andy Dodd, technical analyst at Louis Capital Markets in London, told Bloomberg.

Today’s Agenda

No local data

Overseas data: China current account third quarter; Japan jobless rate November, Industrial production November; German CPI December; UK nationwide house prices December; US Chicago PMI December, Pending home sales November

Market Highlights

SPI futures down 62 points or 1.1% to 5491 about 4.30am AEDT

AUD -0.6% to 70.20 US cents

On Wall St at 12.32pm: Dow -1.9% S&P 500 -1.5% Nasdaq -2.4%

In New York, BHP Rio Atlassian

In Europe: Stoxx 50 -1.2% FTSE -1.5% CAC -0.6% DAX -2.4%

Spot gold +0.8% to $US1277.08 at 12.33pm New York time

Brent crude -3.2% to $US52.73 a barrel

US oil -2.7% to $US44.96 a barrel

Iron ore -0.1% to $US71.48 a tonne

Dalian iron ore -0.3% to 490 yuan

LME aluminium -2.2% to $US1851.50 a tonne

LME copper +0.5% to $US5986.50 a tonne

2-year yield: US 2.56% Australia 1.94%

5-year yield: US 2.61% Australia 1.95%

10-year yield: US 2.75% Australia 2.37% Germany 0.22%

US-Australia 10-year yield gap as of 4.34am AEDT: 38 basis points

From Today’s Financial Review

Murray battens down for more Hayne pain: As AMP shareholders brace for the banking royal commission’s final report, company boss David Murray believes the inquiry will be a good thing for the sector.

Wall St’s epic rally is not how this ends: A rally to end all rallies on Wall Street doesn’t change the fact that if Ray Dalio is right, and it is 1937 again, markets are facing truly inhospitable conditions ahead.

Cash king of the asset classes in 2018: Investors who held on to cash and bonds have been rewarded as global equities and commodities slumped against a backdrop of market volatility, geopolitical concerns and economic slowdown.

United States

US consumer confidence slumped in December to the lowest since July as a gauge of labour market expectations fell by the most in 41 years, the latest sign Americans are growing less optimistic as stock markets gyrate and the expansion moderates.

The confidence index decreased to 128.1 from 136.4, according to a report from the New York-based Conference Board. That missed every economist estimate in Bloomberg’s survey, which called for 133.5. A measure of consumer expectations fell to a two-year low while the share of people expecting more jobs in the next six months decreased to 16.6 per cent from 22.7 per cent, the biggest drop since 1977.

The US Department of Commerce’s Bureau of Economic Analysis and Census Bureau will not publish economic data during the ongoing partial government shutdown, the Wall Street Journal reported, citing an agency spokeswoman.

The Commerce Department releases key figures on gross domestic product, inflation, personal income and spending, trade and new home sales, much of which are closely watched by investors and policymakers.

Europe

The pan-European STOXX 600 index fell 1.8 per cent to its lowest level since November 2016. It had risen as much as 0.5 per cent in early trading but fell back into negative territory after about an hour.

“There is little visibility,” said Oddo Securities trader Mikael Jacoby, citing the recent negative newsflow and weak data.

“To call for a bottom, we need at least a couple of days of strength, not just in price, but also in trading volume, breadth of the market, and a fundamentally supported environment,” also said FXTM strategist Hussein Sayed.

“So far we don’t see a shift in fundamentals. Trade tensions between the US and China remains the biggest unknown factor for 2019,” he added.

All sectors and national indexes in Europe were in the red, with thin holiday volumes helping to make trading more volatile.

The euro zone’s volatility gauge was up to its highest levels since markets sustained a correction last February.

The STOXX 600 benchmark remains set for its worst year since 2008, having fallen 15.3 per cent in the year to date.

Germany’s DAX index, whose big exposure to China has made it particularly vulnerable to trade jitters, is down 19.6 per cent this year, while Italy’s FTSE MIB, weighed down by concerns over the country’s public finances, is down 17.3 per cent. The Brexit-hit FTSE is down 14.5 per cent.

Italian banks fell 1.13 per cent, coming under fresh pressure after the top shareholder at Banca Carige put the troubled lender’s future into question by blocking a 400 million euro ($456 million) new share issue.

Elsewhere, shares in Vinci rose 0.2 per cent after the French construction group said it was buying a majority stake in London’s Gatwick airport for about £2.9 billion. Its shares pared gains to trade up 0.3 per cent.

Asia

The Hong Kong market tracked the fall in mainland Chinese shares on Thursday, marking its lowest close in almost two months as investors sought to mitigate the damage from a fall in Sinopec shares after the surprise suspension two of its executives.

The Hang Seng index fell 0.6 per cent to 25,478.88 points, its lowest close since November 1, while the Hang Seng China Enterprises index shed 0.7 per cent to market its lowest close since May 2017.

Shares of Sinopec, officially known as China Petroleum & Chemical Corp, dropped after Reuters reported that two top officials at the company have been suspended for inflicting severe losses in trading. The company’s stock in Hong Kong ended 4.7 per cent lower. Its mainland China shares fell 6.8 per cent.

At close, China’s A-shares were trading at a premium of 17.94 per cent over the Hong Kong-listed H-shares.

The short and one-factor leveraged Hang Seng index, which is designed to replicate the payoff of a short or leveraged portfolio and is linked to the movements of the Hang Seng Index, was higher by 0.7 per cent on the day at 5433.37 points.

The Shanghai Composite index fell 0.6 per cent to 2483.09 points, while the blue-chip CSI300 index was down 0.4 per cent. The Shanghai stock index marked its lowest close since November 2014. The index now sits below both its 50-day moving average and its 100-day moving average.

Sentiment in the Chinese market remains fickle and confidence is lacking, Zhao Wei, an analyst at Founder Securities, wrote on Thursday. But the risk of pledged shares, which prompted authorities to intervene in October, will give the market some support at key levels.

Zhang also sees the Shanghai index finding some support around 2500 points before the New Year, but “it is hard to see if that will remain the case after that, especially if there are more black swan events” like the Sinopec suspensions.

Currencies

The US dollar fell against the Japanese yen, giving up most of the gains logged in the previous session, as worries about widening cracks in global stock markets prompted investors to load up on perceived safe-haven assets.

The greenback advanced against commodity-linked currencies as oil prices fell toward 18-month lows on oversupply.

The drop in risk appetite prompted investors to pile into low-yielding currencies, Minh Trang, senior FX trader at Silicon Valley Bank in Santa Clara, California, said.

The dollar was 0.6 per cent lower against the Japanese currency at 110.73 yen. The yen tends to benefit during geopolitical or financial stress as Japan is the world’s biggest creditor nation.

The dollar fell 0.6 per cent against the Swiss franc, another perceived safe haven currency.

More broadly, the dollar Index, which tracks the greenback versus the euro, yen, sterling and three other currencies, was down 0.4 per cent

“The dollar has had a great rally this year but it doesn’t have much more in it to go further, especially if you are seeing the Fed slow down in rates,” said Trang.

Commodities

Copper prices recovered on Thursday, but gains were capped and other metals slipped on renewed worries about global growth.

Three-month copper on the London Metal Exchange rose 0.5 per cent in closing open outcry trading to $US5986.50 per tonne after hitting $US5941 a tonne on Monday, its weakest since September 18.

A global nickel market deficit will nearly halve to 49,000 tonnes in 2019 from 93,000 tonnes this year on higher output of primary metals by global suppliers and of lower-grade nickel pig iron (NPI) in Indonesia, Sumitomo Metal Mining said on Tuesday.

LME nickel shed 1.1 per cent to end at $US10,770 per tonne after touching $US10,700, its weakest since October 2017.

Russian aluminium company Rusal said that the board chairman resigned as part of a restructuring it agreed to implement in exchange for a waiver from US sanctions. The move to lift Rusal sanctions has weighed on prices due to concern about additional supply. LME aluminium slid 2.2 per cent to finish at $US1851.50 a tonne, the lowest since March 9, 2017.

The cash aluminium contract moved to a $US7.80 a tonne premium to the three-month contract , the highest premium since July and contrasting a discount of $US18.25 seen two weeks ago. This usually indicates tighter supply of nearby supplies.

Prices for steel and steelmaking raw materials ended lower in China on Thursday with coke and coking coal erasing gains made earlier in the session on hopes demand will pick up as steel mills begin to rebuild inventories ahead of the Lunar New Year.

Expectations of a boost in demand as steel mills begin restocking provided some support to prices, said Darren Toh, steel and iron ore data scientist at Tivlon Technologies, a Singapore-based steel and iron ore data analytics company.

“We are expecting a further build up of steel inventories at the warehouses (especially as mills switch to using discounted iron ore),” he said. “(It) is a clear sign of firm commitment to produce more steel despite margin erosion.”

The most-active coke futures, for May delivery, on the Dalian Commodity Exchange ended down 0.2 per cent at 1889 yuan ($US274.12) a tonne, after rising as much as 3.3 per cent earlier in the session.

Coking coal eased 0.2 per cent to 1172 yuan a tonne, after gaining as much as 2.3 per cent earlier in the day.

The most-active rebar steel contract on the Shanghai Futures Exchange slipped 0.4 per cent to a two-week low of 3396 yuan a tonne. Hot rolled coil fell 1 per cent at 3335 yuan.

Australian Sharemarket

Australian shares soared on Thursday, the first session for local stocks since the Christmas holiday, lifting on the back of a historic night on Wall Street.

The S&P/ASX 200 Index rose 103.4 points, or 1.9 per cent to 5597.2 points, its best performance since November 2016, as it followed a strong session in the US.

with Reuters, Bloomberg, AAP

Comments? Questions? Let us know what you think of Before the Bell: timothy.moore@fairfaxmedia.com.au

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