A heavy sell-off for global equity markets

Tuesday, January 27, 2015

Global equity markets experienced a heavy sell-off in today’s trading session, as disappointing economic data and renewed uncertainty regarding Eurozone’s economic conditions limited risk appetite and weighed on market sentiment. The CAC, DAX, IBEX and London equity benchmark plunged between 1.05% and 1.8%, while in the US the Dow Jones shrunk over 350 points (-2.08%) towards 17,300 at the time of writing.

Dow Jones shrunk towards 17,300

INDU Index (Dow Jones Industrial 2015-01-27 16-03-10

Gold rebounded strongly and climbed over 1% towards the key area of $1,300/ounce, while silver breached $18 (+1.2%).

XAU- Gold Spot

XAU Curncy (Gold Spot   $_Oz )  D 2015-01-27 16-02-32

On the macroeconomic front, we received fairly disappointing economic data which weighed heavily on market sentiment. The UK economy grew 0.5% q/q in Q4 2014, slightly below analysts’ expectations of a 0.6% growth, while the y/y number shrunk to 2.7% compared to 2.8 initially estimated.

In the US, durable goods declined sharply 3.4% in December versus analysts’ estimates of a 0.6% rise. Richmond Fed manufacturing index declined to 6 in January from 7 in December, while Markit services PMI rose slightly to 54.0 in January from 53.3 in December. On the other hand, consumer confidence surged to 102.9 in January compared to 92.6 in December, beating analysts’ expectations of 95.5. In addition, new home sales climbed to 481,000 in December compared to 438,000 in November. 

The main focus will turn to the Fed meeting tomorrow regarding an outlook of the US employment conditions and inflation figures as well as its FOMC rate decision. Following the recent uncertainty in the global markets along with the recent mixed US economic data, we do not expect any big surprises from the US Federal Reserve Bank tomorrow. According to latest reports, it is not expected an interest rate rise until at least March 2015.   

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