Well, what will we talk about this morning? Another interesting 24 hours for the markets. As you’ve probably seen by now, the global equity rout extended on Tuesday with Asian markets following the US bourses tumbling, sending a gauge of world stocks toward the biggest three-day slide since 2015. Headlines show US stocks sank the most since 2011, with the Dow Jones Industrial Average sinking more than 1,100 points, as the equity selloff reached a fever pitch amid rising concern that inflation will force interest rates higher. The S&P 500 fell 4.1% to wipe out its January gain and turn lower on the year. The index hit a few interesting milestones by capping its worst day since the US lost its top credit rating, topping the rout that followed China’s shock devaluation of the yuan, the Brexit selloff and jitters heading into the presidential election.
Trading volumes were almost double the 30-day average. All but two stocks in the broad gauge declined. European stocks too are heading lower this morning unsurprisingly, although not yet showing the same losses seen in the US and Asia. The German DAX for example is down 1.85% at the time of writing and the French CAC 40 at 1.6% in the red.
While all the action was primarily seen in equities, FX markets remained relatively quiet, certainly the three main currency pairs we track did. EURUSD shows little change opening above the 1.24 mark this morning. Sterling is looking like the worst hit of the three. GBPUSD is back trading below 1.40 and EURGBP creeping higher too back at .8870 (GBPEUR 1.1274). Of most interest is GBPUSD, trading back below 1.40 will test the support of 1.3943, the 21 Day Moving Average. Should this be breached, we are also likely to see sterling tested against the euro too with .89-.8920 coming into view.
At Clear Treasury, we will always aim our focus on FX market developments. However, the equity market developments are too large and significant too ignore and may signal a jump in overall market volatility which will filter through to FX markets also. With this potential market crossroad in mind, it may well be worthwhile to take stock and review your current FX requirements versus level of hedging in place. Feel free to contact your dealer or team in Clear Treasury to discuss in further detail.