US markets slumped again - 14.10.2014

U.S. stocks fell sharply after Monday’s volatile session, reflecting investor’s anxiety after last week’s selloff that ended with the S&P and Nasdaq recording their worst weekly declines in two years. The S&P 500 index declined 31.39 points, or 1.65%, to 1874.74. The benchmark index has pulled back more than 6% from its peak reached on September 18. The Nasdaq Composite Index lost 62.58 points, or 1.46%, to 4213.66. The Dow Jones Industrial Average closed down 223.03 points, or 1.35%, to 16321.07. An additional negative signal interpreted by traders as a sign of further declines was S&P 500 index falling below its 200-day moving average. All of the main benchmarks are currently trading below their 200-day moving averages. Investors are waiting for corporate earnings with healthy revenues for indications that the US economy is on the right track after last week’s deep losses caused by global economic growth concerns. Markets are looking ahead to corporate earnings reports from financial sector particularly, which constitutes the major component of US economy, and a rising financial sector can lift the whole stock market. Financial institutions like J.P. Morgan Chase & Co. , Citigroup Inc. and Wells Fargo & Co are expected to report earnings today before the market opens.

European stocks also slipped Monday. The Stoxx Europe 600 index declined 0.1% to 321.56. The Stoxx 600 last week fell 4.1%, the worst weekly decline since May 2012, triggered by concern about possible contraction in Europe’s biggest economy after negative data from Germany were released. On Monday, data showed German wholesale prices had dropped 0.9 percent year-on-year in September, indicating disinflationary pressures despite ECB monetary easing program targeting to bring euro zone inflation to just under 2 percent. Markets are pricing in the possibility of euro zone falling into recession for the third time. This week corporate financial results will be released release in Europe as well as, and aggregated third-quarter revenue for Stoxx 600 companies is expected to decline 0.8% from the year-earlier period.

Today at 10:30 CET the Consumer Price Index YoY and Core Consumer Price Index for September will be published in Uk, with readings expected to decline from 1.5% to 1.4% and 1.8% to 1.7% respectively. At 11:00 CET The ZEW survey of Economic Sentiment for the German economy and the euro zone Industrial Production data yoy for August will be released in Europe. The tentative forecasts are neutral and negative respectively.

Brent crude dropped to the lowest level in almost four years after Iraq followed Saudi Arabia and Iran in cutting prices. Iraq’s State Oil Marketing Co., known as SOMO, said yesterday that Iraq, OPEC’s second-biggest producer, will sell its Basrah Light crude to Asia at the biggest discount since January 2009. Iraq set its November Basrah Light crude at $3.15 below the average of Oman and Dubai prices for buyers in Asia. Iran last week said it will sell oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia. There is no indication OPEC may cut production to help push prices up as lran’s and Iraq’s moves after Saudi Arabia’s decision to cut its export prices for Asia mean oil producers intend to defend their market shares instead of cutting output to support prices. Brent for November settlement slid $1.32, or 1.5 percent, to end at $88.89 a barrel on the London-based ICE Futures Europe exchange, the lowest settlement since Dec. 1, 2010. The volume of all futures was 17 percent above the 100-day average. Prices are down 23 percent from this year’s highest close of $115.06 on June 19. West Texas Intermediate’s discount to Brent narrowed.

Gold futures rose to a three-week high as investors got reassurance that the Federal Reserve will keep US interest rates low over concern that the global economy is slowing, driving the dollar down and boosting the demand for gold. Federal Reserve Vice Chairman Stanley Fischer said on October 11 that weak growth outside the US may prompt the central bank “to remove accommodation more slowly than otherwise.” Gold futures for December delivery rose 0.7 percent to settle at $1,230 an ounce at 1:43 p.m. on the Comex in New York. Earlier, the price reached $1,238, the highest for a most-active contract since Sept. 17. The dollar fell as much as 0.5 percent against the currency basket.