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Straits Times 3,134.71 +18.54 +0.59%
Hang Seng 26,664.28 +160.35 +0.61%
Dow Jones 27,001.98 -22.82 -0.08%
Shanghai Composite 2,978.71 -12.33 -0.41%
Market Commentary – 08/08/14
Corporate Digest | 08 August 2014

US stocks fell over renewed concerns of geopolitical tensions in Ukraine, sending the Dow to a significant support level from late April to May.

Retaliatory measures from Russia and the disregard for intergovernmental institutions show that the ex-soviet nation is not really looking for conciliatory talks with the West, despite tighter sanctions.

While the Russian ban on food imports from Japan, the US and the EU were first thought to be damaging for Russia, this now looks less so, as Latin America stands ready to fill that demand.

Meanwhile, the impact on those countries is seen as limited. It could prove troublesome if the tit-for-tat situation were to include a ban on oil exports, which could seriously derail an already fragile European recovery.

Nonetheless, some damage was felt overnight, with major poultry producers in the US taking the brunt. Tyson foods dipped two percent overnight.

Risk aversion continues to reign supreme with all sectors in the S&P500 recording a decline except for the defensive utilities, while bonds and gold climbed.

The S&P500 lost 0.6 percent while the Dow fell 0.5 percent to come close to its 200SMA, a major inflection point which analysts use to determine a change of trend.

In the currency markets, the dollar traded higher against the majors except for the yen as risk aversion continues to engulf sentiment in markets.

The dollar was aided by a jobless claims report which continued to show a steady recovery in the labour market. The 289k print contributed to the four-week average claims hitting a fresh eight-year low.

Elsewhere dovish, talks from ECB President Mario Draghi weighed on the euro despite officials keeping the benchmark interest rate unchanged.

From the ECB press conference, we learnt that officials stand ready to ease monetary policy further if required, as they hired a consultant to look into outright purchases of the controversial ABS.

Officials also highlighted concerns over developments in Ukraine and the spill-over effects from wider sanctions. The euro pared losses towards the end of the European session.

That said, after having dived more than 2.5 percent in a month, the sell-off looks exhaustive, especially with RSI potentially presenting divergence.

In Asia today, investors will get a peek at the health of China’s economy, with the release of Chinese trade data. Exports are widely expected to slow, driving the surplus down to US$26 billion from US$31.6 billion.

The Aussie dollar remains under the assault of a surprisingly downbeat unemployment rate from yesterday while the support hovers around 0.9250 after the release of the RBA monetary policy statement.

CMC Markets is a leading global provider of Contracts For Difference (CFDs) and Foreign Exchange (FX).

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