By Jonathen Chan (market analyst, CMC Markets and Stockbroking)
Global share and commodity markets deflated overnight as a potential economic crisis in Turkey dominated headlines. The banking sector in the EU sunk against the backdrop of contagion fears. The fallout extended to other emerging markets, with equities tanking across regions as investors drift away from risk assets in fear of a domino effect. In particular, Argentina’s Central Bank raised policy rate to 45 % as a precaution to the potential sticky situation. The US dollar and Japanese Yen strengthened as investors looked for boltholes. The sustained headline risk from the European continent is pointing to another rough day for Asia Pacific investors.
Copper and oil plummeted overnight in accordance with pessimistic economic outlook among emerging markets. Gold price breaching important support through USD$ 1200, suggesting rising interest rate are pushing up the opportunity cost to hold them. There are conflicting currents for the gold price, as the traditional safe-haven instrument is buffeted by a stronger US dollar.
China Industrial Production and Retail Sales later this morning may inform trading today. However the key event is the inflation reads and GDP growth announced across the European region tonight. Analysts are watching closely for any signs of economic improvement. German GDP is expected to show the economy grew at 0.4% during Q2 but GDP in the EU could slow to an annual growth rate around 2.1% from 2.5% previously. If the Turkish headlines continue, and growth moderates, a correction may strike.