US benchmark indices erase Wednesday's gains

Friday, October 10, 2014

US equity markets gave back all of Wednesday’s gains yesterday as benchmark indices reversed lower on global growth concerns. The VIX hit an eight month high towards 19.40 yesterday while risk assets including oil and copper faced firm selling pressure throughout the afternoon. The S&P 500 and DJIA both shed 2.0% yesterday as anxious investors sought out safe haven assets with firm gains in the dollar index adding further pressure to the stock market. After selling off for three straight sessions the DXY gained 0.36% on Thursday but not before intraday dips saw the index fall towards 85.00 for the first time since 24th September. Investors have switched to a more risk off approach towards the end of the week as a combination of Fed caution regarding global growth and the IMF cutting its global growth outlook has seen market optimism wane.

Front month WTI prices extended the move into bear territory as prices reached their lowest level since July 2012, dropping below $85/bbl to trade at $84.06/bbl at one stage before recovering slightly to end the session at $85.77/bbl. Excess supply continues to weigh heavily on investor sentiment with this week’s EIA report indicating a 5m barrel w/w increase in crude oil inventories. Front month WTI futures have lost 6.3% so far this week as selling pressure this morning saw the benchmark open below $84.50 and trade as low as $83.59 early on, on track to post the biggest weekly drop since June 2012. According to the EIA, US crude oil production increased to 8.88m bpd last week, the most since March 1986 and with the supply overhang only increasing we may see significant downward pressure in the crude oil market for some time.

Spot gold prices rallied for a fourth straight session on Thursday, finding firm support at the previous session’s close as it ended the session around previous tentative resistance just below $1,225/oz. Gains throughout the day tested levels towards $1,2334.50/oz however, these higher levels failed to take root as a stronger USD crimped significant moves on the upside. Gold prices have increased by 2.8% since Monday when selling pressure saw intraday dips form a triple bottom around $1,182/oz, a level last reached on both 28th June and 31st December last year.   

S&P 500 reverses lower, giving up Wednesday's gains

SPX Index SP 500 Index Daily 2014 10 10 07 22 41

VIX spikes higher on global growth concerns

VIX Index Chicago Board Options 2014 10 10 07 25 20

Gold prices extended gains for the fourth striaght session yesterday

XAU Curncy Gold Spot Oz 2014 10 10 07 32 17

Events for today

0600

JP

Sep

Consumer Confidence

0930

UK

Aug

Trade Bal & Non EU

1330

US

Sep

Import/Export Prices

1900

US

Sep

Fed Budget

OE: 

Nov  Brent Crude (ICE) 

Topics: Gold, Crude oil, WTI, DXY
More from: Kash Kamal