Financial markets were unsettled overnight even though a very short term Italian debt auction was successful, ECB overnight deposits climbed again, with the LTRO having no short term effect on calming market fears of a credit crisis in the new year.
In Europe, the UK FTSE finished flat, down only 0.1% to 5507 points, whilst the German DAX dropped 2% to 5771 points, mainly due to the over-leveraged and under-capitalised German banks (Deutsche and Commerzbank fell 3.5%).
The chart of the DAX below shows the German bourse has almost completed a triangle, with a breakout expected either way in the New Year as markets return to full volume:
In the after hours futures markets, both markets are down slightly following the US closes.
The Euro (EUR/USD) dropped below the “critical” 1.30 level against the USD and is currently trading at 1.2936, as the USD Index rose to almost 81 points, about to eclipse its former one year high:
US equity markets continued the slump in risk, all finishing down at least 1%. The S&P500 closed down 15 points or 1.2% to 1250 points, the tech heavy NASDAQ dropped almost 1.5% down to 2589 and the Dow Jones was off 1.1% or 139 points down to 12152 on light volume. US index futures have continued to slip after the close.
The AUD remains remarkably resilient amongst the risk-off move and the drop in commodities (see below) and remains above parity against the USD. Although it fell 0.6 of a cent, it is currently trading at 1.009 against the USD.
With tensions rising in the Straits of Hormuz, WTI crude actually fell 2%, dropping below $100USD a barrel to $99.56, with Brent crude also falling nearly $2USD a barrel to $107.89
The falls extended to other commodities, with the CRB Index down 0.6% and still in a dominant downtrend, reverting back to pre-QE2 values:
Gold was another casualty, falling over $40USD an ounce, now at $1554, alongside silver (down $1.70 an ounce to $27.04) and remains well below its nearly 3 year long trendline as seen in the weekly chart below:
Note that gold remains within its dominant secular bull market trend channel when viewed on the monthly price chart and with a longer term view:
The Aussie SPI Futures point to falls on the open for the S&P/ASX200 index, currently down 36 points or over 0.5%, probably opening around the 4050 level.
Trading Day will cover the Asian market session and the “ASX8” stocks after the close in the afternoon.