The S&P 500 dropped 0.7% today, snapping a three-week rally which had pushed equities to all-time highs amid the tensions in Iraq. Many in the market were expecting a technical correction for the S&P500 following months of sustained gains and the geopolitical tensions certainly acted as a catalyst. That’s not to say risk sentiment hasn’t eroded – on the contrary, it has and by a fair amount as volatility in the market spikes. The VIX, a measure of volatility, last week posted the biggest gain since April, rebounding from a seven-year low on June 6, surging 15% to sit around 12.18. Across other markets, gold’s safe-haven appeal helps the precious metal advance to a three-week high of $1,284.85 an ounce. FX markets are relatively subdued with euro a bit weaker, the yen stronger and the USD steady. In the Gulf, Dubai stocks dropped for the second day on the back of Iraqi violence with the DFM General Index to its lowest level since March 27, with construction stocks driving the losses. Elsewhere, the Abu Dhabi General Index and Kuwait Stock Exchange index have also retreated as investors dump equities in the region in order to scramble clear of the escalating geopolitical tensions. Meanwhile, relations between Russia and Ukraine are straining further over the issue of gas supplies, with Kiev accusing Moscow of cutting off pipelines running to Ukraine - talks between both countries regarding unpaid bills have resulted in a deadlock thus far. Turning to the US, economic data is likely to offer some direction and clues over the state of the US economy ahead of the Federal Reserve’s policy meeting on Wednesday. Already, the New York Federal Reserve’s Empire State manufacturing report showed a rise to 19.28, beating market expectations. Separately, US Industrial Production in May rose 0.6%, which is slightly above consensus of +0.5%. Looking ahead, we have the NAHB housing market report out later today.
Posted on: Mon, 16 Jun 2014 14:03:20 +0000