The significant decline in stock prices, which began on Wednesday around the time US markets opened also led to decline of the dollar against other major currencies. While most emerging market currencies, such as the Indian rupee (INR) or the Russian Ruble (RUB) were negatively affected by the sell-off, the move was very timid compared to what happened in Emerging Markets around two months ago when the Turkish Lira (TRY) crashed.
Gold had very limited volatility compared to the move in the other markets, while oil prices fell by a wide margin given the concerns about economic growth and also the highest increase in crude oil stockpiles over the course of one week, according to data from the American Petroleum Institute (API).
Stocks declined across the board globally with a sell-off that began around the time regular trading opened in the United States on Wednesday. The losses further extended to Asian indices and a further downside was seen in almost all future markets on Thursday morning.
Initially it looked like cryptocurrencies would be spared from the downturn, as they are mostly unrelated to the real economy. However then in the night of Thursday a severe downturn was seen, which erased billions in market capitalization within just a few hours. Compared to other major cryptocurrencies, the Bitcoin was relatively stable, while Ripple, Ethereum, Bitcoin Cash and others lost double-digit percentages within that short timeframe. It was not immediately clear whether the move was connected to the recent assessment of the IMF, which mentioned that rapid growth in the crypto market could add vulnerabilities to the financial systems.
On Thursday in France, Sweden Spain and the US inflation (CPI) data will be released. Greece publishes its Unemployment Rate and in South Africa mining sector statistics are due. Given the jitters in the sovereign debt market, markets could also watch the results of the long term bond auctions in Italy more closely than usual.
The fall in stock prices especially in the US, as well as moderately declining yield on US Treasury Notes possibly helped the euro to recover against the greenback.
Positive economic data from the euro zone could have also helped the common currency as the French Industrial Production (IP) was at +0.3% m/m in August (expected +0.1%) and the Italian IP at +1.7% m/m (expected +0.8%). In the US data from the Mortgage Bankers’ Association was overall negative with the Composite Index declining by 1.7 compared to the previous week.
On Thursday in France and in the US the Consumer Price Index (CPI) will be released, with the US also releasing Jobless New Claims and Treasury Budget level data.
Another important release are the meeting minutes of the last monetary policy meeting of the Governing Council of the European Central Bank (ECB), expected around 1:30 PM CET.
Europe 50
European indices were also affected by the downturn in stock prices with the Europe 50 index falling to the lowest level in six months.
One of the few stocks with strongly positive performance on Thursday morning was Bayer (DE:BAYGN), after reports surfaced that the company could spin-off its Animal Health unit. The German energy company RWE further extended losses, closing for the fifth consecutive trading session lower and almost 20% down since the beginning of the month. The company lost their bid in court for the exploitation of a coal mine in Western Germany.
After CPI data from France, Sweden and others on Thursday, the German CPI statistic will be released on Friday. Also on Friday the European Union will release Industrial Production data.
WTI Oil
Despite the onslaught of hurricane Michael on the Gulf of Mexico, shutting down a significant portion of the production there, oil prices faced a steep decline, given the added inventories and drop in equity prices.
The American Petroleum Institute (API) reported that 9.75 million barrels were added to crude inventories over the course of the past week. This being the biggest one-week gain in 1-1/2 years and significantly above market expectations, oil prices had a relatively limited downside, after they plunged with the opening of the US market and the subsequent decline in stock prices.
On Thursday the Energy Information Administration (EIA) will release its crude oil, gasoline and distillate stockpile statistic. Then on Friday the US Baker Hughes Oil Rig Count will be published, showing the number of operating oil rigs.
US 500
Stock equity markets had their worst trading day in eight months on Wednesday. Analysts explained the fall in equity values with rising interest yields as seen in the interest rate decisions by the Federal Reserve Bank, as well as rising yields US Treasury Notes.
Even the so-called FAANGs were not spared from the downturn and thus also accelerated the decline of the NASDAQ (US Tech 100), with Amazon (NASDAQ:AMZN) (-5.83), Apple (NASDAQ:AAPL) (-4.51%) and other stocks in this group showing significant losses.
The stock of the fintech company Square (NYSE:SQ) (-10.17%) declined even significantly stronger than the market average, after the company’s Chief Financial Officer announced her departure from the company.
On Thursday highly important economic statistics in the US will be published, such as the Consumer Price Index (CPI), Jobless New Claims, the Treasury Budget level, as well as statistics of the Federal Reserve Bank. Then on Friday some of the key banks on Wall Street, such as JP Morgan and Citigroup (NYSE:C) are scheduled to publish their quarterly earnings.
