Daily Stocks Update: Markets Edgy Ahead of US Retail Sales – Feb 12, 2016

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Stock markets in Europe closed deep in the red, weighed down by overall risk aversion and growing concerns about the banking sector. Disappointing earnings results from top banks like Societe Generale and Deutsche Bank were one of the main reasons for the slump, with shares of banks in the region down by 6.3% for the day.

The German DAX closed 264.42 points to 8,752.87 (-2.93%), the French CAC 40 ended 164.49 points down to 3,896.71 (-4.05%), and the Euro Stoxx 50 index was 100.87 points down to 2,688.18 (-3.62%). In London, the FTSE closed 135.33 points down to 5,536.97 (-2.39%).

Portuguese bond yields surged above 4% for the first time since 2014, signaling that investors were dumping lower-rated debt and moving their funds over to more liquid and higher-rated bonds. An IMF official warned of renewed Grexit fears, as the debt-ridden nation is still short of an economic reform plan that could effectively trim its deficit.

Risk aversion also weighs on US markets

US markets were also off to a rough start but equity indices managed to keep losses at just around 1%. The S&P 500 index ended 22.78 points down to 1,829.08 (-1.23%), the Dow 30 index was down 254.56 points to 15,660.18 (-1.60%) and the Nasdaq closed 16.8 points down to 4,266.8 (-0.39%).

Fed Chairperson Janet Yellen’s testimony appears to have dashed hopes of a March rate hike, as she emphasized that central bank officials will take the dollar’s recent rallies into consideration when it comes to making monetary policy adjustments. Federal funds rate futures seem to be pricing in the odds of seeing no additional rate hikes for the quarter.

Meanwhile, the S&P 500 VIX rose 1.89 points to 28.14 (+7.04%) to signal increased uncertainty in the financial markets. Gold is up to a one-year high of $1,262.90/ounce, confirming that investors are flocking to safe-haven assets.

Asian shares poised for a negative week

A few Asian markets reopened during the latter part of this week, but the return of these investors did very little to prop up share prices. The Nikkei is currently down 480.93 points to 15,250.65 (-2.94%) and the S&P ASX 200 is down 35.18 points to 4,785.90 (-0.73%).

US retail sales and UoM consumer sentiment data are up for release today, with market watchers still hopeful that strong data could bring some risk appetite back to the table. In any case, profit-taking activity might also trigger a bounce for some equities ahead of the weekend and the return of Chinese traders from their Spring Festival holidays next week.

 

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.