The strong USD dominated the markets today and weighed on market sentiment. The USD index rallied strongly and broke above the key level of 100.0 against a basket of currencies. The US equity markets posted renewed losses today following fairly modest economic data from the University of Michigan survey. The Dow Jones index declined sharply over 250 points (-1.5%) towards 17,600, while the S&P 500 and NASDAQ retreated over 0.9%, at the time of writing.
There was a more optimistic tone across European equity markets, despite the ongoing uncertainty over Greece’s debt issues and economic stability. The euro remained under renewed pressure falling sharply and breaking 1.05 against the US dollar. However, European equity markets edged higher with the DAX, CAC and IBEX gaining between 0.35% and 0.55%. The London equity benchmark index missed the uptrend and slid slightly lower towards 6,700.
WTI front month futures extended losses and retreated over 3.5% towards $45/barrel, following a bearish IEA oil monthly report, high levels of crude oil inventories and the strong US dollar rally. In London, energy stocks declined sharply as the BG Group, Tullow Oil, BP and Royal Dutch Shell fell between 1.4% and 3.0%.
It has been a fairly volatile week for global equity and commodity markets. The strong USD is likely to weigh further on market sentiment, limiting any possible risk appetite. Next week, the main focus will turn to the FOMC meeting regarding the timing of a possible increase of US interest rates.