Downfall In Stock Markets Exceeded 2% - 8.11.2012

Yesterday the U.S. market was down due to significant drop in stocks - all the major stock indexes lost more than 2%. S&P 500 fell by 2.37%, Dow Jones Industrial Average was lowered by 2.36%, Nasdaq - down by 2.55%. The reason for such a strong collapse and risk aversion that led to the US dollar strengthening, according to results of the day, was a number of factors from the USA and Europe. Barack Obama’s landslide sharpened the unresolved fiscal issues. The United States will be possibly forced to make significant cuts in government spending in 2013, in case the budget deficit is not reduced in the near future. There is also European debt problem hanging over the markets. Greek Parliament approved a regular cut spending and increase in taxes yesterday, but this factor could not prevent the decline in Euro vs. US dollar, Yen and Sterling. The European Committee has published a report saying that the GDP in the Eurozone will grow only by 0.1% in 2013, and the current year results will be worse than the previous forecasts. EURJPY fell this morning to the lowest value since the middle of October at 101.74 (see the chart below). As for the single currency vs. greenback, it fell yesterday down to 2-months low at 1.2735. EURJPY, daily chart It is worthy to note that the Labor Market data from Australia today were better than expected: the number of employees increased by 10700 in October, and the unemployment rate remained at 5.4%. Aussie is near a local maximum at 1.0479 set yesterday. Market participants are waiting for the ECB and the Bank of England meetings completion, which probably will not bring big surprises. The U.S. and Canada Trade Balance data are coming in the evening, as well Jobless Claims data for the largest economy of the World. Poor statistics may support further risk aversion.