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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 24 August 2015 at 13:40 GMT

US equities in meltdown as crisis extends

Former managing editor, TradingFloor.com / Saxo Bank
Denmark
  • US equities markets plunge on open by more than 6%
  • £56 bn wiped off the value of the FTSE 100 by lunchtime European session
  • EURUSD snaps beyond 1.1700 in run up to market open
  • Rouble heads north of 70.00 despite dollar retreat
  • Oil markets continue to tread water well below respective marks of $44/b and $39/b
  • Market rout began on August 11 when China devalued yuan
  • Rout has gathered pace in last week to usher in multi-year lows through indices
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 He's looking up but markets are going down...almost everywhere. Photo: iStock

By Martin O'Rourke and Clare MacCarthy

Markets moved into full-panic mode Monday afternoon leaving the dollar in droves in the run up to the market open and sending EURUSD beyond 1.1700 at approximately 1311 GMT.

The S&P 500 was immediately down 3% to 1,908.10 within a few seconds of opening. The Dow Jones Index was also down more than 5% within a minute of the open to 15,509 and then fell another percentage point for a 1,000 points drop.

"This is history in the making," said Saxo Bank's head of equities strategy at Saxo Bank, Peter Garnry, shortly before the US Open. "What's going on right now is that all the big hedge funds are flashing red alert and cutting positions as soon as they can."

"We have very thin liquidity in EM bonds," he added.

European equity markets are suffering massive damage too. At 1324 GMT, Germany’s DAX index was down 4.76% to 9,935.53 and the Paris CAC had shed 6.13% to 4,540.13.

In London, the FTSE has tumbled 5.14% to 5,869.64, destroying some £56 billion of index valuation by lunchtime.

Although the European trading day isn’t over yet this is shaping up to be the deepest daily plunge since the height of the financial crisis in 2008. 

“Every single VAR model at the major hedge funds is flashing alerts and money managers are getting out of as many positions as quickly as possible,” said Garnry. ”This is risk-off at full throttle.”

EURUSD smashed past 1.1700 in the run up to the US open at approximately 1311 GMT

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 Source: SaxoTraderGO
 

The rouble was also on the receiving end of a battering despite the dollar's relative weakness to hit a low of 71.2861 and continued north of the 71.00 mark for most of the post-lunch European session.

USDRUB hit a high of 71.2861 as the rouble threatens to implode again

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 Source: SaxoTraderGO


Oil meanwhile continued to be stuck firmly in the doldrums with global benchmarks Brent crude and WTI crude respectively at $43.15/barrel and $38.28/b at 1328 GMT, just before the US market open.

While today is being dubbed Black Monday, we should get some perspective here. The Dow Jones Index lost 22% in one day on the Black Monday to end all such Black Mondays in 1987.

Martin O'Rourke is managing editor of TradingFloor.com


3y
Ole Hansen Ole Hansen
One of the biggest opening gaps ever on the SPY:arcx could become its saving grace
3y
thewickedwiz thewickedwiz
Perspective is great....but where do we go from here?

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