Risk aversion was the theme of the day led by the Asian markets which rubbed off globally. The Asian trading session was particularly volatile today as the Nikkie, Hang Seng and the Shanghai Composite, all declined by over 4% on average. The PBoC, after last week’s surprise intervention in the currency markets failed to support the weak equity markets which led to further selling throughout the day.
The market’s overall were mixed with the Yen gaining steady ground, rising 2.61% followed by the Euro which was up 2.05% and finally the Swiss Franc which gained 1.63%. The risk sentiment was clear as the commodity risk currencies felt the brunt of today’s selling with the Aussie, Kiwi and the Canadian dollar all under pressure losing on average close to -1%.
The economic calendar was ironically quiet on a day that has seen extreme volatility. EURUSD surged to test the highs of 1.17 before retreating off the 6-month highs, last seen on its way due in early January 2015. At the time of writing, the Euro has practically erased all its QE induced losses.
The British Pound saw more subdued moves with the currency gaining a mere 0.58%. Nonetheless, the GBPUSD was seen testing the highs of 1.58 at the time of writing. USDJPY was perhaps the most remarkable currency pair as it tested the lows of 116.5 Yen.
The US Dollar Index also dropped to the lows of 92.5 at the time of writing, down by almost -2.2% for the day with further declines likely. The US equity futures markets pointed to a very weak open with the Dow futures posting a loss of 800 points while the S&P futures were down 100 points. Most notably, Apple shares broke the $100 handle as shares were seen trading near the $99 handle in the pre-market trading session.
On the commodities front, Crude Oil futures were down -3.3% for the day trading near the lows of $38.5. Gold futures were perhaps the only commodity which stayed stable trading near the 1150 handle ahead of the US equity market opening session.
In the terms of the economic calendar, Fed’s Lockhart is expected to speak late in the evening, but it is unlikely that the markets would pay any attention at this point in time. Investor sentiment is particularly at risk today as the current volatility is likely to see some Central Bank come out to intervene in the markets. At particular risk could be the CHF where the Swiss National Bank is known to intervene in the currency markets strongly especially in light of a stronger Euro that we are seeing today.
All in all, the market volatility is likely to continue into tomorrow’s session as we can expect to see some kind of a reaction from the Central Bankers and also focus shifts back to the important economic data due this week including the US and UK revised GDP estimates for the second quarter.