Market wrap: Stocks look destined for a fourth day of losses after credit worries sparked significant falls in Europe and the US.
Investors were spooked when ratings agencies cut credit ratings for Greece and government-owned companies in Dubai and warned about deteriorating conditions in the US and Britain. The news sparked a flight to safety, boosting the US dollar and US treasuries and crunching commodity prices.
US stock indexes fell to one-week lows. The Dow slid 1%, the S&P 500 lost 1.03% and the Nasdaq 0.76%. European markets were hit even harder on worries over banks' exposure to troubled Dubai and falling German industrial production. Britain’s FTSE lost 1.65%, Germany’s DAX 1.66% and France’s CAC 1.43%.
Moody's cut its ratings on a swag of Dubai government-controlled companies and Fitch downgraded its credit rating on Greece to triple-B-plus from single-A-minus on concerns over "the weak credibility of fiscal institutions and the policy framework in Greece". In addition, Moody's said that deteriorating public finances in the US and Britain may test their triple-A sovereign ratings.
The US Dollar Index, which measures the greenback against a basket of other currencies, was recently up 0.62%, mainly due to a surge to a five-week high against the euro.
"We spent two months agreeing that when the dollar goes down, stocks and commodities go up. This is a short-term reversal of a very tired trade," said Art Hogan, chief market strategist at Jefferies & Co, quoted on MarketWatch.
Resource stocks copped the worst of the selling in the US. An index of precious metals miners fell 3.83%, oilers lost 1.9% and natural gas companies 1.8%.
Gold tumbled to a three-week low as the US dollar gained traction. The spot price was recently trading at $1,130.50 an ounce, down $27 in a third consecutive losing session.
Oil futures fell for a fifth day, their longest losing streak in five months. Crude futures were recently trading at $72.67 a barrel, down 1.77% and close to the lowest level since mid-October. In London, most base metals suffered minor losses.
Futures traders expect our market to wipe out almost all of last week's gains at today's open. The SPI futures index fell 54 points to 4615.
TRADING THEMES TODAY
DETERIORATING CONDITIONS: I'm bullish by nature but trading conditions definitely seem to have worsened over the last month. Falling volumes, sideways index action, failing breakouts, uptrends flipping over, falling commodity prices... Good trades have been harder to find and momentum has been scarce. Of course, conditions can change in the blink of an eye but for now it's a time to be cautious IMO. That rounding top developing on our index is a worry.
BOUNCE TRADES: Three days of falls have brought several shares near to important support levels. These are great entry levels because you get quick feedback on whether a trade is working or not. Support holds = working, support fails = get the heck out. Look for shares in uptrends that have pulled back for at least two days and have good buying depth.
ECONOMIC NEWS: Another busy day for local news. Monthly consumer sentiment data at 10.30 am and October trade balance figures and monthly home loans at 11.30 am. Tonight in the US: weekly crude oil inventories, monthly wholesale inventories and a speech by Federal Reserve governor Elizabeth Duke.
Ipod, good to have you back, buddy, even if it's not the best day to return! Good luck to you and the rest of the crew today.
