Stocks slide on economy woes whilst Oil plummets 5% on IEA move
City Index June 23, 2011 3:03 PM
<p>Stocks slid across Europe on Thursday by over 1.5% as a multitude of uncertain factors came together to heighten risk aversion. A multitude of factors […]</p>
Stocks slid across Europe on Thursday by over 1.5% as a multitude of uncertain factors came together to heighten risk aversion.
A multitude of factors encouraging risk aversion
Ben Bernanke disappointed the market by refraining from giving enough confidence that the Fed is prepared to act amidst a slowdown in US growth. Chinese PMI data also disappointed to the downside earlier this morning, escalating fears of a slowdown in the world’s fastest growing economy.
We also have continued uncertainty surrounding Greece amidst the EU Summit and traders are wary of any Chinese whispers that may emerge from the summit on what the next bailout and subsequent conditions could look like, despite agendas not officially listing Greece as a topic for debate.
And finally, the unexpected move by the International Energy Agency (IEA) to release 2 million barrels worth of oil stockpiles a day into a market for 30 days when demand was already being questioned has plummeted Nymex and Brent crude prices by 5%, in turn forcing the heavyweight oil sector down by 2.5% in London.
In short, everywhere one looks today seems to be giving reasons to sell stocks and recycle funds to safe haven asset classes.
With the US Dollar Index rallying 1.2% and threatening another break above 76, aligned with a 12% rise in the Volatility Index, the market’s main gauge of fear, this tells a tale of risk aversion in today’s financial markets, a trend growing in prominance over the last few weeks.
Low volumes exacerbating moves
Today’s price action on the FTSE 100 is certainly making traders envisage a case whereby it could retest the 2011 lows of 5591. The deeper we head into the summer months the lower the volumes in the market are likely to be and this can serve to exacerbate price swings, making the UK index all the more volatile. Certainly there has been an element of this ‘exacerbating factor’ within today’s session with volumes lower than average.
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