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Today's equities session is likely to represent a fairly light end to a volatile week, says Saxo Bank head of equity strategy Peter Garnry.
Article / 09 February 2018 at 7:58 GMT

Morning Markets: Fresh equities rout sparks concern

Head of Editorial Content / Saxo Bank
Denmark

Morning Markets


Watchlist

  • Australia: RBA Quarterly Statement on Monetary Policy (already published)
  • China: PPI (0130 GMT)
  • Norway: CPI (0700 GMT)
  • Norway: GDP (0700 GMT)
  • France: Industrial production index (0745 GMT)
  • UK: Index of production (0930 GMT)
  • UK: Trade (0930 GMT)

The S&P 500 index sold off again Thursday (and the Dow lost over 1,000 points) after the US 10-year yield approached the highs again, leaving US stocks down 10% from their January highs. The move led to widespread concern that the troubles seen in US equities could be far from over as indices are now in correction territory by all conventional definitions.

The move away from stocks continued through the APAC session where the Hang Seng index plunged by 2.93% and the Shanghai Composite lost over 4% of its value, leaving Friday's markets with a determined risk-off tone, particularly as contagion has now spread to emerging market shares.

As we head into the European bell, GBP is climbing again versus USD after an overnight retreat from the 1.4050-plus highs seen after Bank of England governor Mark Carney struck a hawkish tone at Thursday's meeting and the bank's Monetary Policy Committee unanimously agreed that inflation above 2% is not acceptable, opening the door to a potential ramping up of the rate hike schedule.

Market signals

Asian session

  • The US government shuts down for the second time in three weeks
  • Robust US wage rise data stoked fears of Fed tightening and risk aversion
  • A fresh tumble on Wall Street undermined investor sentiment in Asia
  • The Nikkei 225 lost 3% and Shanghai Composite 5.6% before paring losses
  • The ASX200 closed down 0.9%, 4.6% lower for the week
  • The Bank of England threatened to hike rates sooner than had been expected
  • Gold retreated as rate hike expectations lifted the US dollar
  • US oil prices fell for a sixth day
  • China's CPI rose 1.5% in January compared to one year ago, in line with forecasts
  • China's producer price index rose 4.3% from a year earlier, the smallest rise in 14 months 
  • The RBA says the current market volatility has not derailed optimism over earnings growth

Forex ahead

  • The greenback edged up after nearing a four-month low against the yen
  • The AUD continued its decline, slipping below 0.78 against the US dollar
  • GBPUSD is rising again into the European bell after retreating from post-BoE highs

From the Floor

Yields higher. "I think the weak bond auctions seen in the US helped spark the selloff in equities," says Hardy

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Turmoil spreads

Asian markets took a tumble on Friday, taking their lead from another rout in the US, says Saxo APAC Sales Trading.

Iron ore firms

Iron ore has defied the gloom and climbed to its highest level in nearly a month, marking five straight days of gains, and a 5.3% rise so far this year, says Saxo Capital Markets Australia.

Wall Street whacked

A fresh bout of selling across the major US indices saw the Dow and S&P 500 plunge, awakening new fears of a more pronounced crash in stocks, writes Michael O'Neill.

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Downhill runs, a bear mascot ... the Winter Olympics underway in Pyeongchang, South Korea, seem to suit the current chill in global equity markets. Photo: Shutterstock

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