Market Review – 06/05/2010 21:05GMT
Euro plunges on lingering Greek contagion fears and 9% slump in U.S. stocks
Euro extended its recent weakness and fell across the board on continuing contagion fears after ECB’s Trichet failed to ease investor’s worries on the Greek debt crisis and he didn’t take fresh measures to help stem the debt crisis. A sharp and sudden selloff in US stocks also sparked off more risk aversion and pushed euro lower.
Although the single currency rebounded to 1.2857 in Thursday’s Asian morning on short-covering, the pair tumbled after the European Central Bank kept its main interest rate on hold at a record low of 1.0% as expected for the twelfth month. Euro remained under pressure throughout the day and eventually hit an intra-day low of 1.2510 in NY afternoon on weakness of the U.S. stocks. The single currency was also pressured by Trichet’s comments that the bank didn’t discuss government bond purchases which some investors had hoped for. Earlier, Germany’s Merkel said eurozone’s tensions were being exaggerated by markets and described speculators as their ‘adversaries’.
The pound tumbled again on Thursday following its fall on Wednesday, dropping below $1.5000 due to worries that U.K.’s election would produce a hung parliament, which would be a negative outcome for the government to reduce the nation’s record budget deficit. Four polls showed David Cameron’s Conservatives would win the most seats, but that would not be enough for a straight majority. Despite cable’s brief rebound to 1.5149 in Thursday’s Asian morning, the pair swiftly fell from there and later nose-dived below 1.5000 and support 1.4781 to an intra-day low of 1.4712 before rebounding. In other news, results of the election would not be known until Friday afternoon in London while the exit polls showed the Conservatives would take the most seats but would miss the overall majority.
The Japanese yen rallied across the board as the debt contagion fears prompted risk aversion and investors sold riskier assets aggressively for the yen as a safe-haven currency. Eur/jpy slumped from 120.72 to 110.49, the lowest level since 2001. Aud/jpy fell from 85.29 to 77.02 and gbp/jpy tumbled from 142.29 to 130.03. Versus the Japanese yen, the greenback fell from 93.99 to 87.95.
In US afternoon, DJI nose-dived by more than 9% but soon pared some of its early loss and ended the day down 3.18% at 10520.32. Reuters reported that trading error at a big Wall Street bank was blamed for market plunge occured and NASDAQ said it was investigating the market activities between 18:00GMT and 19:00GMT. Market sentiment was deteriorated as the CBOE volatility index skyrocketed by more than 60% and reached its highest level since April 2009.
Economic data to be released on Friday include: Swiss Jobless rate,Retail sales, Germany Industrial production, Canada Unemployment rate, U.S. Non-farm payrolls and Unemployment rate.