Daily Analysis – Equities Continue to Drop, Moody’s Downgrades Ireland

Equities

Asian markets posted steep losses as they caught up with Monday’s selloff in Western markets. The Nikkei sank 1.4% to 9926, and the Korean Kospi tumbled 2.2%, as exporters lid in both countries. China’s Shanghai Composite fell 1.7%, and the Hang Seng plunged 3.1%, in its biggest drop since May 2010.

European indexes continued to decline, although Italian banks rallied after several days of losses. The FTSE fell 1%, the DAX dropped .8% and the CAC40 lost .9%. Moody’s downgraded Ireland’s debt to junk, warning the country may need another bailout. European officials raised the possibility that a Greek default may be necessary in order to get the situation under control.

In the US as well, markets fell, but not as dramatically. The Dow lost 59 points to 12447, the Nasdaq dropped .7%, and the S&P 500 slipped .4%, as markets fell for a third consecutive day.

Chip-maker, Novellus, plunged 11.2% after issuing a week outlook, pulling down the semiconductor sector as a whole.

Treasuries and Commodities

Bonds continued to rise, as waves of negative news continue to push up the appeal of US Treasuries. 10-year notes gained 8/32 to yield 2.89%, and 30-year notes advanced 16/32 to yield 4.18%.

US Crude rallied 1.7% to 96.75, and natural gas added .6%, as energy rallied.

Gold jumped 20.20 to 1569.40, nearly reaching the record high set in early May. Silver gained 1.2% to 36.11, and copper added .5%, rising to 4.388.

Agricultural commodities posted impressive gains, as wheat jumped 5.1% and sugar rallied 5.4%

Currencies

The yen soared 1% to 79.40, breaking through the 80 barrier, as investors fled to safety. The Euro mostly recovered from its losses, dropping .5% to 1.3977, after plunging as low as 1.3837 earlier in the day. The Swiss Franc advanced .6% to .8312, while the Australian Dollar fell .6% to 1.0598.

Economic Outlook

The US trade deficit rose to $50.2 billion, its highest level in almost 3-years, mostly due to oil imports. The TIPP Economic Optimism Index was well below expectations at 41.4, and lower than last month’s 44.6.

The minutes from the latest FOMC meeting revealed the Fed is considering another round of stimulus.

Wednesday’s reports will include Import and Export Prices, weekly mortgage applications, and weekly oil inventories. The Treasury will auction 10-year notes.

-Bradley Welcher

About the author: BinaryOptionStrategy- David Frank

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