US shares resumed their steep falls today, as investors abandoned risky assets following the Fed decision last night. Commodities spreads nose-dived, with even gold suffering heavy losses. For now, the only safe-havens appear to be Treasuries and the yen.
By 4pm (London time), the Dow Jones had lost 3.13% to 10776.32, while the S+P 500 had shed 2.9% to 1133.06. In London, the FTSE 100 endured more selling, although it came off its lows for the day (at 5013.55) to stand 4.5% down at 5049.30.
Wall Street dives further
US markets have continued yesterday's heavy selling, with the Dow and S+P 500 slumping after the opening bell. A 'perfect storm' of yesterday's Fed meeting, poor Chinese data and bad news on the eurozone economy has sent investors running for the ultimate safe-havens of the US dollar, Treasuries and the Japanese yen.
For today at least, 'Operation Twist' has proven to be a crushing disappointment.
In a sense, today's actions underscore how little things have improved over the past three years. Company balance sheets are far more secure, with cash reserves now much higher than before. However, both individuals and companies are nervous about the future, and are choosing not to spend their cash for fear of encountering difficult times in the future.
The US economy is still hobbling along, with jobless claims today showing no real improvement. In Europe, the blame game continues unabated, as politicians and officials cast around for a scapegoat while refusing to sit down and craft a real solution.
Truly radical action is needed from all major governments, but that does not seem to be forthcoming.
China data worsens
As if the Fed meeting wasn't enough to send markets down, investors have had to deal with weak data from China.
The HSBC flash China manufacturing PMI for September fell to 49.4 from 49.9 last month, reigniting worries about a slowdown in the world's second-largest economy.
Fears of a so-called 'hard landing' in the Chinese economy, whereby tightening measures cause economic growth to grind to a halt rather than slowing gently, have been prevalent for some months now, but HSBC said that it was unlikely that the Chinese economy would suffer such an event.
Trade data, the bank added, still showed solid export growth, so for the moment at least external demand is helping keep the Chinese economy afloat.
Commodities and Miners Tumble
The Chinese Data has not helped mining stocks in London, with Vedanta and Antofagasta falling more than 11%.
The stronger US dollar is having a major impact on commodity prices, with oil, gold, silver and copper all falling, and soft commodities weakening considerably as well.
As a result, raw materials companies are providing some of the most impressive falls for the day.
The rush for the US dollar has caused gold to suffer its heaviest falls since early August, with the yellow metal now around $1730 per ounce. Gold miners, which have so often gained recently even as the wider mining sector falls, were down as well, with Randgold Resources down 6.5% at 6720p and African Barrick Gold falling 3.7% to 582.5p.
HP CEO's position in doubt
US companies appear to be itching to dump their CEOs at present. First it was Yahoo! giving Carol Bartz the heave-ho, and now rumours are swirling that Hewlett Packard is about to part with Leo Apotheker, less than a year after hiring him.
During his time at the helm, HP has had to slash forecasts again and again, and the two previous occupants of the post have been pushed out as well. Hewlett Packard shares jumped almost 4% yesterday as the first reports filtered through, but they are down 2% today to $23.50.
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'Commodities Spreads Plummet Following Fed Stimulus Measures', Article by IG Index, last update: 22-Sep-11
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