Equities tread water, metals blasted
Equity traders are treading lightly today in the wake of the painful losses racked up this week. Stocks in Europe and the US are experiencing relatively low levels of volatility as the concerns about the health of the global economy hang over sentiment. In the past few sessions there have been growing worries that several major economies could be heading for a recession and that is dictating the mood. The losses seen on equity markets are relatively small when compared with the declines registered in commodities. The FTSE 100 and the S&P 500 are down 0.2% and 0.1% respectively, while silver and copper are both down over 2.5%. Industrial metals typically act as a good gauge for the global outlook and seeing as silver has tumbled to a new two-year low, it really speaks to the sour sentiment.
CPI in the eurozone jumped from 8.1% to 8.6%, a new record high. It marginally topped the 8.5% forecast. Earlier in the week, the ECB’s chief Christine Lagarde, said we will have to wait for the inflation report before deciding on interest rates, and now the metric has hit a new all-time high, it seems even more likely the bank will lift rates by 0.25% later this month. The bank’s September meeting will be in focus too as that could be the update where the bank decides to speed up their planned tightening policy. The euro is higher versus most currencies.
The US dollar is dominating the currency markets as the US dollar index is close to retesting its recent five year high. To a certain extent, the greenback is receiving a boost from the risk-off mood in the markets. As mentioned above, metals are suffering due to fears about the global economy, but part of their decline is also down to the jump in the dollar.