Risk aversion prompts sell-off across equities

Tuesday, December 09, 2014

Risk appetite suffered further setbacks during today’s session as crude oil prices slid to a five year low, prompting investors to take flight in safe haven assets as concerns regarding the global economy saw equity benchmarks on both sides of the Atlantic move lower on short term profit taking. Front month Brent futures traded as low as $65.29/bbl today before recovering some of yesterday’s steep sell-offs towards the end of the European session towards $66.60/bbl. The persistently weak outlook for crude as well as the wider commodities market continues to question the stability of the global economic recovery.

Political uncertainty in Greece acted as one of the main drivers for the sell-off in Europe after the Greek government brought forward the presidential election to next week which could see further obstacles emerge for Prime Minister Antonis Samaras if his candidate fails to be elected. The ASE index lost over 11% today as investors took flight on uncertainty ahead of the election, posting its worst daily performance in 27 years when the index experienced similar selling pressure in December 1987.  

The general risk aversion saw investment demand for gold pick up as the yellow metal saw gains extend over 2.6% higher on the day after building on firm support around yesterday’s close and pushing above $1,235/oz towards the end of the European session, testing resistance at the 100 day MA. After facing extensive selling pressure towards the end of October and beginning of November where prices bottomed out around $1,132/oz, gold prices have rallied as much as 8.5% as recent macroeconomic data from the eurozone and China continued to disappoint.

At the time of writing US stocks were trading considerably lower as both the S&P 500 and DJIA extended declines from yesterday’s close, trading between 0.7-0.9% lower. Investors could continue to pull out of global equities in the coming sessions as investors struggle to find stability in global risk assets and until crude oil prices stabilise we could see uncertainty dominate market activity throughout the week. 

Brent futures slip to a fresh year-to-date low during intraday trading

CO1 Comdty Generic 1St CO Fut 2014 12 09 15 34 10

ASE index experienced worst one day performance since 1987

ASE Index Athens Stock Exchange 2014 12 09 15 34 00

Spot gold prices rally on safe haven demand

XAU Curncy Gold Spot Oz D 2014 12 09 15 32 58

Topics: Gold, Crude oil, Brent
More from: Kash Kamal