Daily Analysis – Asia and Europe Tumble following US Selloff

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By, BinaryOptionStrategy.com

Equities

Asian markets opened sharply lower following Wednesday’s steep selloff on Wall Street. The Nikkei dropped 1.7% to 9555, and the ASX 200 tumbled 2.3%, its steepest drop in a year. In Korea, the Kospi fell 1.3%, and in China the Shanghai Composite dropped 1.4%. The Hang Seng slumped 1.6%.

In Europe, the major indexes extended their losses, as the DAX fell 2% and the CAC40 fell 1.9%, while the FTSE lost 1.4%. Banks and miners led the losses, as concerns about global growth reemerged.

US markets ended mixed, as the Dow shed another 42 points to 12249 and the S&P eased .1%, while the Nasdaq gained .2%. Moody’s warned the US debt rating could be downgraded if no progress is made on the budget as Congress battles over the debt ceiling.
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Dow Closes off of Lows

Retail stocks were mostly lower after retail sales generally disappointed. Gap fell 4.1%, Limited Brands dropped 2.2%, and warehouse superstores Costco and BJ’s both fell 1.5%.

Treasuries and Commodities

Bonds sold off, largely reversing Wednesday’s gains. 10-year notes fell 22/32, pushing the yield up to 3.02%, and 30-year notes tumbled 1 23/32 to yield 4.24%.

Oil inventories unexpectedly rose last week, but crude oil managed to inch up .21 to 100.50. Natural gas spiked up 3.4% to 4.786, while gasoline futures slipped .4% to 2.965.

Metals closed lower, led by silver which fell 4% to 36.19. Gold closed down 7.70 to 1534.70 and copper lost a penny to 4.0965.

Agricultural futures closed mostly higher, with sugar gaining 5.6%, coffee up 2.3%, and wheat and corn up more than 1%.

Currencies

The Euro rallied 1% to 1.4466 and traded as high as 1.4514 amid rumors Greece had agreed to tougher austerity measures. The Pound inched up .2% to 1.6352, and the Australian Dollar gained .4% to 1.0660. The Yen, Canadian Dollar, and Swiss Franc closed flat.

Economic Outlook


Thursday’s reports failed to comfort investors, with further signs of weakness in the US economy.

Initial jobless claims were slightly higher than expected at 422K, and factory orders fell more than expected, dropping 1.2% in May.

Friday’s economic reports include the pivotal non-farm payroll report, and the ISM non-manufacturing PMI. A surprise to the upside could send the markets rallying, while disappointment is largely priced in after Wednesday’s steep slide.
 
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