So you wake up this morning, have a double espresso because the little Princess is teething and check the markets – Ding! And that’s not from the espresso…
So what happened? Why the “sudden” risk-off? Apart from the expected negative GDP (gross domestic product: i.e the failed method of measuring economic success) print for the EU in Q4 2011, what really set things off was – yep you guessed it – the continuing Greek debt crisis. Before you read Pascoe this morning, regaling the fact that Greece is only 1% of nothing, there’s no problem et al, lets check out what happened in detail – remember to read my weekly update to always put this daily noise in context:
The UK FTSE fell nearly 2%, but paled in comparison alongside the German DAX, which fell 3.4% to 6633 points. This has been building for awhile – the failure to break resistance barriers set by this liquidity led (LTRO) equity rally, at 5950 and 6950 points respectively, for the two major European bourses was obvious to most:
The Euro (EUR/USD) was pummelled, losing over 1.2 cents against the USD dollar to 1.31 where it is currently trading this morning and looking weaker by the day. As most currencies (except the strong Yen) fell against the USD, the USD Index increased by over 0.5 points to be just under 80 points, strongly consolidating at this resistance level, possibly breaking out:
As Deus Forex Machina and I warned earlier the AUD has fallen sharply, losing over 1.4 cents against the USD, the commodity proxy just above 1.05 and probably on its way to 1.03 in the short term, and maybe (for the sake of “adjustment”) a lot lower:
The US markets fell in response to Europe’s woes, the NASDAQ Composite by over 1.5%, with bubblicious Apple (AAPL) falling 0.5% . Regular readers would remember my link about the Israeli central bank buying US stocks (and hence AAPL) – is that a mark of a top or what? Older readers may remember the inverse – the so-called Brown Bottom, when then Chancellor Gordon Brown sold most of the UK’s gold reserves at around $200USD per ounce.
I think central banks should stick to manipulating currencies, or in the case of the Australian version, not, and trying to tame inflation, even though they are looking at the wrong measure…
The S&P500 closed down 1.7% to 1341 points, after failing to break its former resistance level in recent days. For those that ignore technical analysis, this is called a “trend breaker”:
On to the arguably more important debt markets, the majors rallied in this risk-off move, US 10 year T-Notes yields dropping 0.06% to 1.94%, German bonds (bunds) similarly, yields down 0.05% to 1.78% For reference, Aussie 10 year bonds also gained in price, with yields falling below the 4% barrier again, back down to 3.97% with the yield curve still inverted.
To commodities, which didn’t escape the carnage and may prove the risk-off theory. Energies lost by several dollars a barrel, with WTI crude finishing at $105 a barrel, and Brent crude below $122USD on the 3 month futures, thankfully taking some steam out of this trend.
As I suggested yesterday, Gold appeared to be weakening (with a series of lower lows on the daily chart) and indeed, it fell almost $30USD an ounce overnight to well below $1700 at $1674USD an ounce:
The S&P/ASX200 index futures are pointing to a big drop on the open – probably at least 50 points or well over 1% to around 4150 points on these very poor leads.
My Trading Day post will cover the Asian market session and the “ASX8” stocks after the close in the afternoon.
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