A heavy sell-off in global equity markets

Thursday, September 25, 2014

Global equity markets plunged today with the Dow Jones index falling more than 200 points (-1.25%) below the 17,000 level, while the S&P 500 and Nasdaq also retreated sharply by 1.2% and 1.67%, respectively, at the time of writing.

Dow Jones Index

INDU Index (Dow Jones Industrial 2014-09-25 16-27-28

European equity markets tracked the downtrend in late trade, giving back earlier gains to finish the session sharply lower. The CAC, DAX, IBEX and London benchmark index declined sharply between 0.9% and 1.5%.

DAX Index

DAX Index (Deutsche Boerse AG Ge 2014-09-25 16-27-06

Bank of England’s Governor Mark Carney reported today that the time to increase the benchmark interest rate is getting closer. He also mentioned that the BoE would step up oversight of people in the insurance sector and will begin consulting on that this year, according to Bloomberg. Sterling retreated sharply towards 1.63 against the US dollar, after previously hitting a day’s low at 1.6275. 

GBPUSD Spot

GBPUSD Curncy (GBP-USD X-RATE)  2014-09-25 16-22-29

On the macroeconomic front, we received disappointing US economic data which weighed further on market sentiment, prompting investors to another round of heavy sell-off across the global equity markets.

Durable goods orders fell sharply by 18.2% in August fairly in line with analysts’ estimates of 18.0%, raising further concerns about a slowdown in the US manufacturing sector. Markit Services PMI declined to 58.5 in September, missing estimates of 59.2, while the KC Fed manufacturing activity increased to 6 in September from 3 in August, in line with Bloomberg analysts’ estimates. Furthermore, US jobless claims increased by 293,000 for the week ending 18th September 2014, less than analysts’ expected of 296,000.

Furthermore, the strong US dollar weighed on most commodity prices today, as the USD index rallied strongly to reach a 4-year high at 85.30. Brent front month futures extended losses towards $96 per barrel, while silver and gold came under further pressure with silver spot heading towards $17.30. Base metal prices retreated sharply; aluminium fell towards $1950, while copper slid lower towards 6680.   

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