European equities drift lower, gold rises

Thursday, March 13, 2014

Risk assets continued their downward slide today as geopolitical tensions and concerns over slowing growth sent investors searching for safe havens. European equity indices extended losses today with London’s blue chip index erasing a significant portion of the gains accrued throughout February as it edged down for the fifth consecutive session. Wider European markets also faced a widespread sell-off throughout the day as the bearish sentiment carried over from Asian markets.

Chinese economic data released early this morning was largely to blame for the shifting mood as both retail sales and industrial production came in lower than expected in February. Retail sales grew 11.8% y/y in February, below expectations of 13.5% growth while industrial production growth slowed further to 8.6% against 9.5% forecast. Investors, concerned that Beijing will be unable to maintain growth momentum, retreated from risk assets and piled into gold, sending the yellow metal towards $1,375/oz for the first time since 19th September.

Safe haven currency demand saw the yen strengthen towards 102.00 against the dollar while the Swiss franc traded towards 0.8700 against the dollar, a two and a half year low, on rising tensions between Russia and Ukraine. Early gains on Wall Street, prompted by better than expected retail sales which advanced 0.3% in February and a surprise drop in initial jobless claims which fell 9,000 w/w, were quickly erased. At the time of writing both the S&P 500 and DJIA were trading over half a percent lower as headlines were dominated by the threat of sanctions against Russia and concerns that the bond default by Chaori Solar and other small, privately held companies risked triggering a wave of bad debt, further signalling Beijing’s willingness to ease controls and accelerate financial reforms. 

JPY strenthens towards 102 against the dollar

JPY Curncy Japanese Yen Spot 2014 03 13 16 12 47

CHF gains on Ukraine concerns

CHF Curncy Swiss Franc Spot D 2014 03 13 16 12 26

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