Weak economic data from the US and China has encouraged selling of stocks and commodities over the last 24 hours. Americans’ claims for unemployment benefits remained at essentially the same level as last month, while a Philly Fed regional manufacturing survey showed yet another contraction. Brent crude futures fell 3.7% to settle at $89.23 a barrel – their lowest close since December 2010, while WTI lost 4% on the day to settle at $78.20, the lowest since October. Coming just a day after the Fed disappointed investors with its “no QE3 yet” message, it’s little surprise that we’re seeing the same old dash to the US dollar and Treasuries, as deflation expectations rise. The Dollar Index (USDX) is back above 82.00, while the yield on the 10-Year Treasury Note has fallen to 1.62%.
Precious metals are under pressure again, with gold falling towards $1,550 and silver breaking below $27. We saw strong buying support show up for gold last month when it fell below $1,550 courtesy of Asian central banks, so bulls will have to hope the same buyers come to the rescue. Likewise, silver tested the $26 mark at the end of last year, but encountered strong buying support that sent the metal on a $10 rally to $36 by the end of February. $26 is critical support.
Moody’s added to the gloom after the US close by downgrading the long-term credit ratings of 15 major North American and European banks. This will force these banks to post extra collateral against trades, and adds to the bearish pressure on stocks, commodities, and the bonds of many eurozone governments. As the chart below (from Ron Griess at The Chart Store) hints at, the US stock market could end up losing a lot more fat yet.
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Gloom And Doom Back In Style
Published 06/22/2012, 07:22 AM
Updated 05/14/2017, 06:45 AM
Gloom And Doom Back In Style
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