Europe
Today was just one of those days in which nobody is going to buy stocks. Air strikes in Yemen and what appears to be a horrific massacre of a plane full of passengers by its co-pilot are just not the making of a risk-friendly environment.
European markets opened sharply lower on the uncertainty surrounding airstrikes in the Middle East that could further polarise and de-stabilise the region. The disturbing news that the co-pilot of crashed Germanwings flight likely deliberately downed the plane added to investor disquiet.
UK
Stronger than expected retail sales volumes in the UK for February were not enough to overcome global selling of risky assets that began in the US yesterday and followed through to Asian and European markets on Thursday.
The FTSE 100 was a sea of red with only the likes of Randgold and Centrica (LONDON:CNA) trading higher as gold and utility stocks were sought out on safe-haven buying. Airlines easyJet Plc (LONDON:EZJ) and British airways-owner IAG (LONDON:ICAG) led the declines with oil prices higher and the airline industry pulled into disrepute by the Germanwings disaster.
Having just broken through its 2015 peak of 260p yesterday, shares in BT Group (LONDON:BT)were trading sharply lower on news of its re-entry into the mobile phones industry with a £5 monthly 4G plan. Confirmation of investor dissatisfaction with BT’s aggressive move into mobile before completing its EE purchase was the move higher in Vodafone Group PLC (LONDON:VOD) shares.
The US semiconductor group led US markets lower on Wednesday and that led to a big drop in UK-listed chip-maker ARM Holdings (LONDON:ARM) the next morning as investors chose to sell high-valuation technology stocks.
US
US stocks sold off heavily on the open over Middle East tensions and falling European markets but recuperated thereafter as the chance of genuine oil supply-disruption faded.
Shares of Apple (NASDAQ:AAPL), Twitter (NYSE:TWTR) and Alibaba (NYSE:BABA) that had lead declines yesterday were gainers on Thursday as tech enthusiasts bought in on the dip.
Facebook (NASDAQ:FB) was a notable laggard after its new marketplace of apps received mixed reviews whereas Twitter’s new live streaming app called Periscope was applauded sending shares over 2% higher.
FX
The US Dollar saw a massive initial sell-off on the back of commodity (especially oil) buying but losses tapered off leading to small gains after Fed speakers Bullard and Lockhart reiterated the expectation of a rate hike this year.
Lockhart acknowledged that the first quarter for the US economy looks soft and said he was surprised by the dampening effect of the strong dollar on growth however he still expects a rate-hike “mid-year or a little later.”
Bullard suggested “Now may be a good time to begin normalising US monetary policy” while emphasising the risk of holding rates at zero for too long.
USD/JPY broke below it March 18 low as investors looked for safety in the traditionally low-yielding Japanese yen but pushed off its lows before touching 118.
EUR/USD briefly broke above its post-FOMC meeting peak above 1.1050 on better German confidence data but later slid back as the dollar picked up some dip-buyers and Eurozone money supply data slightly missed expectations.
EUR/GBP slowed its recent incline ahead of 0.74 after better retail sales demonstrated the relatively better health of the UK economy compared to that of mainland Europe.
Commodities
A Saudi Arabia-led coalition of Arab states began an air-strike campaign against rebels in Yemen in the early hours of Thursday in attempt to quell an uprising against the government and prevent civil war.
Crude oil skyrocketed with Brent moving over 5% higher intraday; Yemen is not a big oil exporter in of itself but its Aden port is at a strategic location at the mouth of the red sea leading into the Suez Canal where most Middle Eastern oil leaves for the rest of the world.
The chance of actual supply disruption seems unlikely given that Egypt controls the bulk of the Suez Canal and was involved in the strikes. The volatility seen in oil markets was triggered by the airstrikes in Yemen but the real catalyst is the falling US dollar that has been triggering a rally in numerous commodities including gold, silver and copper.
Gold and silver moved above $1200 and $17 per oz respectively on safe-haven demand.
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