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Daily Analysis – Wester MarketsTumble on Contagion Fears

ByBinary Options Strategy
Published 12/08/2011, 05:33 AM
Updated 05/14/2017, 06:45 AM
NDX
0.12%
DE40
0.50%
JP225
0.47%
HK50
2.64%
Equities

Asian markets rose, lifted by hopes that the announced resignation of Italy’s Prime Minister would help in stabilizing the country’s debt crisis.  The Nikkei rallied 1.2% to 8755, but Olympus shares continued their freefall, dropping by 20%.  In Korea, the Kospi ticked up .2%, despite losses of more than 4% in market heavyweights, LG Display and Hynix Memory.  Around the region, the ASX 200 gained 1.2%, the Shanghai Composite rose .8%, and the Hang Seng shined, jumping 1.7%.

In contrast, European markets dropped, as concern over Italy took center stage.  Yields on Italy’s 10-year notes crossed above 7%, signaling the market has little confidence in the country’s ability to pay its debts.  The DAX and CAC40 both fell 2.2% and the FTSE shed 1.9%.

The selling pressure intensified in the US with the Dow tumbling 389 points to 11780.  The S&P 500 plunged 3.7% and the Nasdaq dropped 3.8%, as the VIX rocketed up 31% to 36.16.  News that Greece’s government had failed to agree on a new prime minister added to the European debt fears.

Dow Jones Indu Average Index

The Dow Tumbles Nearly 400 Points

HSBC shares fell 8.7% after posting a 36% drop in profits.  Macy’s shares sank 5.3%, and GM shares tumbled 10.9% even though both companies beat profit estimates.

Currencies

The Dollar soared as fears of contagion sent the Euro down 2.1% to 1.3546.  The Australian Dollar, representative of the risk-trade tumbled 2.3% to 1.0150.  The Swiss Franc shed 1.6% to 1.1001, and the Pound fell 1.1% to 1.5920.

Economic Outlook

Political instability in Europe is threatening to make solving the debt problems even more challenging, and is raising the likelihood of a global recession due to contagion.

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