Equity markets started the day on the back foot with optimists thin on the ground. From bad, things have only got worse. This afternoon’s US services PMI data not only missed the mark and is now contracting, sending equities on the other side of the Atlantic crashing. The biggest percentage fallers in the FTSE have been almost entirely made up of the mining sector; the usual suspects of Glencore and Anglo American’s falls being measured in double digits.
FX markets have again played their part in colouring trader’s screens in red with Brexit inspired fears sending GBP/USD crashing through support at $1.3964. Having broken through this level the next major areas of support are multi-year lows ultimately looking at $1.3500 a succession of lows and lower highs can be expected from here.
The South African Finance minister has announced a budget of job cuts, higher taxes and spending reviews. Now, only time will tell if this will be enough to prevent the country’s sovereign debt being downgraded from investment grade to junk. Regardless of the austerity measures being incorporated, FX markets have been quick to knock the rand with even sterling bouncing against it, a reflection of just how bad things are.
Higher-than-expected oil inventories will add to the pressure on both WTI and Brent crude to resume their moves lower. With no real sign of intent from oil producing nations to cut production levels, the bears are left to cherry pick selling levels.
Disappointing US economic data and currency market chaos have been the perfect breeding ground for renewed optimism for gold as the precious metal has bounced to over $1250 in the afternoon session. Gold’s move higher is all the more impressive when you consider that these big moves are occurring during the US trading day normally a time when the sellers materialise.