Trading screens fill with red as investors flee risk on mass
City Index March 15, 2011 7:21 PM
<p>Dealing screens were filled with red today for the fifth session in a row as traders quickly escaped risky asset classes such as stocks on […]</p>
Dealing screens were filled with red today for the fifth session in a row as traders quickly escaped risky asset classes such as stocks on the problems endured in Asia as a result of the earthquake and tsunami.
The markets are now in correction mode and enduring some of the worst sessions seen for some time. To see the Nikkei lose as much as 14% this morning at one point has sent a shiver down the spines of European traders who were already concerned with the tensions in North Africa and the Middle East whilst European debt problems remain on the horizons.
We have the huge costs of the tsunami in Japan to consider whilst the potential nuclear ramifications are developing with each hour. We also have continuing tensions in Libya and the Middle East and let’s not forget traders are still uneasy about the implications of sovereign debt on nations such as Spain and Portugal. It’s the perfect storm of nagative sentiment and has all come to a head this week.
This fact is further typified by the FTSE Volatility index, a market gauge of trader fear or pessimism, which has rallied 30% to its highest point since June last year.
The FTSE 100 is now trading 8% off its February highs and with the near term momentum gaining towards the downside, traders could be waiting for the UK index to hit the 5500 level before being enticed back into the market. But with tensions remaining on several fronts, sentiment in the market remains particularly fragile.
Naturally it is the sectors that are classified as the most risky that has been hit the hardest by today’s falls. The mining sector has lost over 4% whilst energy firms have lost almost 3% and banks have fallen around 1.5%.
As traders have sought out safe haven asset classes such as the US dollar, this has in turned pressurizes commodity prices, which have also fallen on expected reduced demand from Japan. This in turn has forced the prices of energy firms and mining companies lower. As heavyweight firms on the FTSE 100 Index too, this is where much of the 3% losses on the UK Index have originated from.
Continued selling out of insurance firms on liability cost fears has also forced the insurance sector lower by 2.5% today, to add to sector losses of some 8% already over the last three trading sessions.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.