AM Analysis
Yesterday marked a continuation of a repricing of risk
Yesterday marked a continuation of a re-pricing of risk. The market is demanding a greater premium to hold riskier assets as a result of a general change to earnings expectations and the future cost of capital. Put those factors into a pot that contains a market that hasn’t seen a significant correction in over seven months, and it becomes understandable why buyers aren’t letting sellers out too easily.
The Dow closed 326 points lower last night, something that continued into the overnight session in Asia. The Nasdaq’s tech stocks were particularly hit, as the winners of the past twelve months were subject to a broad unwinding. Markers of fear and protection showed themselves, too. Treasuries, gold and Vix contracts became heavily demanded, pushing yields down and driving up the cost of portfolio protection.
– David White
PM Analysis
Global plunge continues into the afternoon
The global plunge continues into the afternoon with European shares playing catch-up from yesterday’s steep losses incurred in the US session. So far, $2.9 trillion has been wiped from global equities this year as investor’s fear the global economy is stuttering. With the Federal Reserve trimming their bond purchases, investors are now questioning if the US economy is strong enough to support itself without Fed assistance.
On a lighter note, figures have shown British construction activity unexpectedly picked up more than expected in January, reaching its highest level since the financial crisis. The Purchasing Managers Index showed an increase to 64.6, much better than the 61.6 expected. US futures are indicating a higher open, rebounding from their largest loses since June. Yum Brands and Michael Kors Holdings traded higher before the open after reporting better than expected earnings.
– Lee Mumford
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