The financial markets stabilized somewhat after steep selloff. The Dow once dropped to as low as 15783.55 overnight, but closed the session down -41.23 pts only at 15837.88. S&P 500 also just lost -8.73 pts to close at 1781.56. That was followed by broad based recovery in Asian markets. Treasury yields also recovered with 10 year yield up 0.031% at 2.766% while 30 year yield was up 0.029% at 3.680%. Dollar index continued to struggle in tight range around 80.50. In the currency markets, yen continues its retreat against other major currencies as risk aversion receded mildly. Meanwhile, the Aussie and Kiwi also pared back some of last week's losses.
A development to note is the Sterling's strength just ahead of the GDP data from UK today. The UK economy is expected to grow 0.8% qoq in Q4, at the same rate as in Q3. The overall 2013 GDP growth could be at 1.9% which is the strongest number since 2007, comparing to the mere 0.3% in 2012. And that would confirm UK as the strongest economy in Western Europe last year.
Other focus include US durable goods orders which is expected to growth 1.0% in December while ex-transport orders are expected to grow 0.7%. S&P Case shiller 20 cities house prices are expected to grow 13.7% yoy in November. Conference board consumer confidence is expected to improve to 80 in January.
Of course the focus will also remain on how the emerging market rout develops. Selloff in emerging markets late last week has hit global financial markets. As investors took profits from risky assets, they parked their capitals in safe-havens, sending Japanese yen, Swiss franc and gold, higher. While some attributed the selloff to Fed's tapering and concerns over China's slowdown and potential credit crunch, declines in some emerging market currencies such as Turkish lira and Argentina peso were mainly driven by domestic factors. Yet, coincidence of these factors with concerns over the Fed's tapering and China's disappointing data release might have triggered a bigger impact on the market than on any other occasions. More in Emerging Market Selloff Triggered by Mix of Domestic and Global Factors.