US equity markets are off their lows but still heavily weighed today with the DJIA and S&P500 trading with losses of 2%. Several factors have caused this pronounced sell-off, such as post the election result the US focus now turns to the fiscal cliff which has to be negotiated before the end of the year and is only 7 weeks away. Secondly, in Europe there was been another release of weak German economic data which even caught the attention of ECB's Draghi and it seems that the very core of Europe is now feeling the pain. The comments from Draghi today on Germany have led to vague and outside speculation of an ECB rate cut as early as tomorrow. Finally, the first of two Greek votes this week is later today and even if these votes are successful the vote split will likely be very close and therefore this adds further uncertainty before Greece can finally receive the next aid tranche.
Conversely, the US treasury curve has seen a marked drop in yields with the 10y yield falling 12.5BPS on the day. Investors have looked for the safer havens due to the fundamental factors at play and there has been precious little economic data to change sentiment. The 10y note auction today was lacklustre as yields were seen as unattractive but the fast money selling at the results were quickly overridden by the risk-off buyers.
The USD and JPY have been the biggest beneficiaries, again the safe haven flows have superceded other factors and USD/JPY has broken the key 80.00 level to the downside. The EUR is softer due to the aforementioned German concerns and ECB rate decision tomorrow and the GBP is also in wait-and-see mode for the BoE. The NZD maybe one to watch later in session due to the release of Q3 employment data from New Zealand.
The energy markets have unsurprisingly mirrored the slide in equities with additional pressure emerging from the DOE weekly report which showed builds in crude, distillate and gasoline components. Spot gold has retraced more than half of yesterdays spurt to the upside back towards the USD 1700 level.
Print 18:37, 07 Nov 2012 - Market Analysis - Source: RANsquawk
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