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China and Greece send markets on a wild ride

CMC Markets

Uncertainty and volatility in world markets continues to increase, creating opportunities for active traders on both sides. The overdue correction of overextended stock markets in the US and Europe continued today. Although crude oil could not be used as an excuse as it staged a trading bounce, there were lots of other excuses out there for a selloff. The three main factors impacting trading today in world stock markets were: 1) Follow-through from yesterday’s selloff in China which saw parabolic Shanghai stocks fall back to earth on tighter lending rules. 2) European markets sold off and treasury yields increased on renewed political risk concerns after Greece’s government moved up plans for a parliamentary vote on the country’s next President which could set the stage for an election in 2015 that could bring the euroskeptic Syriza party to power. 3) Ongoing speculation about whether the Fed will drop its “considerable time” between the end of QE3 and the first interest rate increase at next week’s meeting European stock markets took the biggest hit with major indices finishing down 2-3%. US markets fell in the morning and at one point the Dow was down 200 points, but they did manage to claw back most of their losses in the afternoon and the NASDAQ even managed to finish in positive territory on the day. The S&P/TSX, meanwhile, benefitted from a trading bounce in crude oil and energy stocks to stabilize from a big Monday selloff. The flip side of the growing uncertainty that pushed down stock markets was a renewed interest in defensive havens. Gold had a big rally and broke out of a downtrend, gaining over $40.00/oz at one point and posting a 3% plus gain on the day while silver staged a 5% rally. In addition, JPY was the top performing paper currency gaining over 1% with USDJPY falling back under 120.00. Today has the potential to be more active for trading in Asia Pacific markets. The repercussions from yesterday’s China news may continue to reverberate through markets and today’s China inflation reports could add more information for traders to digest. AUD and NZD may remain active not only on China speculation but also on positioning ahead of tomorrow’s RBNZ decision (with questions over whether it will try to talk down the dollar again) and tomorrow’s Australia employment report. Japanese markets may also be active today as traders look ahead to Sunday’s election and speculate on whether the results will give the government a mandate for more reforms and stimulus or curtail their efforts. Corporate News There has been no major corporate news after the US close today. Economic News Significant announcements released overnight include: UK same store sales 0.9% vs street 0.6% UK industrial production 1.1% vs street 1.8% UK manufacturing production 1.7% vs street 3.2% Greece consumer prices (1.2%) as expected Germany trade balance €21.9B vs street €18.9B Upcoming significant announcements include: 10:30 am AEDT Australia consumer confidence previous 96.6 10:50 am AEDT Japan producer prices street 2.6% 12:30 pm AEDT China producer prices street (2.4%) 12:30 pm AEDT China consumer prices street 1.6% 7:45 am GMT France industrial production street 0.1% 9:00 am GMT Norway consumer prices street 1.9% 9:00 am GMT Norway producer prices previous (3.4%) 9:30 am GMT UK trade balance street (£2.4B) 10:00 am GMT Greece industrial production previous (5.1%) 10:30 am EDT US crude oil inventories street (2.7 mmbbls)

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