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FX Day Trading - 5 August 2011
Mayhem in the equity markets
Stock markets down significantly
European debt fears rise again
Speculation about further QE in the US on the rise
Swedish police arrested a 31 year old man after he apparently tried to build a nuclear reactor in his kitchen.
Mr Handl said he had ‘always been interested in physics and chemistry’ and wanted to ‘see if it’s possible to split atoms at home’. After his arrest he said, ‘So, my project is cancelled!’ It is not yet clear if Mr Handl considers his actions naive or misguided.
European leaders found their experiment is still in full swing but just took a turn for the worse. The European Commission president Mr Barroso admitted that the markets remained to be convinced that they are taking appropriate steps to resolve the European debt crises. He called for a "re-assessment of all elements".
Online spread betting investors stated their opinion on both his comments and this experiment clearly and swiftly.
In a dramatic day European markets fell by more than 3%. The Dow Jones had its worst day in 3 years - 500 points down in one trading session! The S&P tumbled 4.8% and has dropped 11% since July 22. Asia continued the sell off with the Hang Seng index down 4.65%.
Mr Barroso’s comments rattled the markets as investors interpreted this as an admission that the plans to resolve the European debt crisis are too complex and incomplete. Mr Trichet also acknowledged yesterday that there is a "particularly high" level of uncertainty about the economic outlook.
This causes great concern for investors and in particular those that lend to banks. As the credit worthiness of some European governments continues to be questioned, lending costs across Europe continue to rise.
This creates more uncertainty that banks in these countries would be able to continue to borrow money. If banks find it difficult to borrow then they are reluctant to lend, and such a scenario would plunge us back into a recession.
This includes banks in the UK where Lloyds Banking Group's shares dropped 10% and Barclays were down 8% yesterday.
Even in the face of rising speculation about the possibility of QE3 in the US, the euro was the biggest loser yesterday and sold off against both the US dollar and sterling.
If this wasn't enough we have payrolls today to calm the markets nerves or send us further into panic mode. In reality the markets are not just reacting to the disappointing policy response from the ECB but also to growing indications that the recovery is running out of steam.
Previewing the release, the markets are expecting July’s headline payrolls to gain +85k after a dismal +18k in June. Many view jobs as the barometer for both growth and the all important feel good factor.
Meanwhile, the police have now apparently phoned every person on their list that potentially had their phones hacked by the media. Those that still feel left out, please form an orderly queue behind Heather Mills. Have a good weekend!
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'Hang Seng Plunges 4.6 Percent as Stock Markets See Dramatic Sell Off', Article by Moneycorp, last update: 5-Aug-11
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