Financial market research and analysis

After record losses were posted on Wall Street on Monday, US equity indices manged to finish the session higher overnight. The Dow Jones turned an initial 500 plus point loss into a 567-point gain, clawing back around half of the 1,100 points wiped out in Monday’s sell off. The S&P recouped some of Monday’s 4.1% loss, finishing Tuesday’s session 1.8% higher.  

Following a solid finish in the US market, Asia also put in an encouraging performance overnight in an attempt to stabilise the global sell off and paving the way for a positive start for European bourses this morning.

Nothing new in these trading patterns..

Despite the extreme levels of volatility, trading patterns in the US session remained consistent with trading patterns which have dominated the market for the past year. In other words, investors were flocking to stocks that perform well in times of economic growth, such as technology stocks, banks and industrials.

Bond yields also ticked higher on Tuesday hitting, 2.8% up from 2.7%. The increase in yields means high dividend stocks, which are seen as an alternative to bonds, became less attractive fuelling a sell off. High dividend stocks such as utilities and real estate were noticeable losers from Tuesday.

The higher yields pushed the dollar marginally northwards. The dollar index hit a 10-day high of 90.03 on Tuesday, before easing into the close, to end the session almost flat.

EUR/USD back to $1.24?

As the sell off on Wall Street receded EUR/USD managed to find its footing again. The pair had dipped as low as $1.2313, breaking through last week’s low before manging to stabilize around $1.2380 as it awaits fresh stimulus.

In the previous session and supporting the euro, German factory orders surprised on the upside increasing 3.8% month on month versus expectations of 0.7%. Meanwhile sentiment for the dollar struggled after US trade deficit data was less impressive and Fed’s Bullard poured cold water on any drastic changes under new Fed Chair Powell. Looking ahead a strong reading from this morning’s German industrial production data could see the euro head towards $1.24 before moving towards resistance at $1.2445. On the downside, any disappointment could see short term support can be seen at $1.2350.

Oil inventory data moves into focus

WTI extended its losses on Tuesday, as crude futures found themselves caught up in the broader market selloff. A stronger dollar and signs of stress in the market weighed on the price of crude. US WTI closed down 0.44%, adding to losses of 1.3% on Monday. However, the fall in US crude was tame compared to  Wall Street carnage over recent sessions. The fact that the selloff on Wall Street is not due to an economic slowdown has helped keep oil relatively buoyant. Heading into Wednesday, the black stuff has shot up almost 1% as investors now turn their attention towards Inventory numbers this afternoon.

The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. Losses can exceed deposits.