Daily Analysis – European and US Markets Tumble on Greek Debt Worries |
Equities
China’s surprise hike in reserve requirements sent China’s markets lower, as the Shanghai Composite fell .9% and the Hang Seng slid .7%. Korea’s Kospi gained .5%, and in Japan, the Nikkei edged up .3% as Honda Motor rallied 2% despite a weak profit forecast.
European markets sank as the market focused on Greek’s debt troubles. The FTSE fell 1%, and the DAX dropped 1.3%, while the CAC40 tumbled 1.5% after Moody’s placed several leading French banks under review for a downgrade, due to their exposure to Greek debt. On the political front, Greece’s prime minister offered to resign to allow for the formation of a unity government.
US market tumbled, as the debt concerns combined with weak economic data sent investors running. The Dow dropped 179 points to 11897, the Nasdaq fell 1.8%, and the S&P 500 lost 1.7%. The VIX rose to 21.7, the highest level since March, as the ‘market fear’ indicator jumped 16.8%
S&P 500 is Approaching March Lows
Pandora’s IPO was met with significant volatility as the shares opened at $26, but slid to close up 8.9% at 17.42.
Treasuries and Commodities
Bonds soared as investors fled to safe-haven investments, reversing Tuesday’s losses. 10-year notes gained 1 2/32, pushing the yield down to 2.97%, and 30-year notes climbed 1 23/32, to yield 4.2%.
In energy, crude oil plunged 4.2% to 95.19, after spiking as low as $94 at one point. Gasoline futures fell 3.9% to 2.9445, while natural gas inched up .1%.
Metals traded mixed, as copper fell 1.2%, while gold rose .5% to 1532.30 and silver gained 1.1% to 35.79.
Agricultural futures traded mostly lower, as cotton fell 4.5%, corn lost 2.8%, and wheat sank 3%.
Currencies
The US Dollar rose significantly against major world currencies. The Euro led the declines, plunging 1.8% to 1.4179, its steepest drop in 10 months. The Pound fell 1,1% to 1.6191, and the Canadian Dollar shed 1.2% to close at .9800. The Swiss Franc extended its declines, sinking .9% to .8530, and the Yen eased .4% to 80.87.
Economic Outlook
Wednesday’s economic data continued the recent trend of weakness. The Empire State Manufacturing Index unexpectedly declined, and the Housing Market Index fell to 13, its lowest level sin 9 months. Core CPI was slightly above expectations at .3%, and Industrial Production rose less than expected. There is little doubt that the US economic recovery is currently struggling.
Thursday’s reports will include Building Permits, Housing Starts, the Philly Fed Manufacturing Index, and weekly unemployment claims.
Earnings are due from Kroger, Research in Motion and Smithfield Foods.
-Bradley Welcher
About the author: BinaryOptionStrategy- David Frank
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