European equity markets drifted lower today, with London’s blue chip index, France’s CAC and Germany’s DAX among the worst performing benchmark indices. Tensions in Hong Kong were cited as the main reason for the overall risk aversion seen throughout the day, with US stocks extending last week’s declines on the civil unrest which could see contagion risks to Chinese mainland growth. UK stocks were subdued as investors reacted to Chancellor George Osborne’s benefit cuts during his speech to the Tory party conference. The announcement outlining £3bn of annual savings by freezing benefits for working age people for two years after the general election comes hot the heels of a previous announcement where maximum benefits a household could claim in a year would be cut from £26,000 to £23,000. Financials were the worst performing sector of the FTSE index with HSBC leading the charge lower towards the end of the trading day, down 2.6% at the time of writing.
At the time of writing, both the DJIA and S&P 500 were trading between 0.7%-0.8% lower while the CBOE volatility index spiked to its highest levels since the beginning of August, rallying as much as 15% higher throughout the European session. Spot gold prices held firm around opening levels as the European session drew to a close, trading around $1,218.50/oz after moves either side struggled to hold firm. The yellow metal remains trading within the previous week’s range
The USD surged to a fresh high today with the dollar index gaining ground notably against the yen and euro, extending the rally that started at the beginning of July well into its third month. Bullish gains early on saw the DXY rally towards 85.798 early on, the highest levels since June 2010, as investors positioned themselves ahead of key data releases this week. With personal spending and income data released broadly in-line with expectations, market participants are quietly confident ahead of PMI, employment and trade data which are all due this week which is subsequently providing firm support to the dollar against a basket of major currencies around 85.50.
Spot gold prices trade within previous week's range
DXY rallies higher