Not a fun night of action if you’re a commodity trader overnight as risk sentiment crumbled in the wake of recession fears across both sides of the Atlantic, with European shares dropping sharply while Wall Street returned from its long weekend almost unscathed. The USD rose strongly on the defensive mood against all the undollars, with Euro and Pound Sterling smashed down to new lows, while the Australian dollar returned below the 68 handle despite yesterday’s big rate rise by the RBA. Bond markets saw a tightening of yields across the curve, with 10 year Treasuries falling back to 2.77%, with interest rate futures also pulling back slightly. Commodity prices were hammered, with oil losing more than 9%, copper down 5% to almost make a two year low while gold fell more than 2%, crushed below the $1800USD per ounce level.
Looking at share markets in Asia from yesterday’s session, where Chinese share markets were dropping sharply going into the close before recovering with the Shanghai Composite closing only a handful of points lower at 3404 points, while the Hang Seng Index finished also dead flat, closing 0.1% higher at 21853 points. The daily chart was showing a desire to breakout above the previous highs at the 22000 point level but considerable resistance is still keeping this market in check, with session highs failing to match the previous false breakout tops. Momentum continues to rollover here, so be cautious of low volatility that could beget higher downside volatility soon:
Japanese stock markets however had a much better session with the Nikkei 225 index closing up 1% at 26423 points. Risk sentiment on the daily futures chart however still shows possible further downside with price action still unable to make any move above the high moving average. Daily momentum is building on the negative side as this looks more and more like a dead cat bounce, with a large pullback probable for today’s session:
