Michael Hewson has been giving us some links from his morning so here’s a couple of choice sores.
White House: Ukraine won’t have to repay a disputed $3.2bn loan from the International Monetary Fund (IMF)
EU: Lithuania won’t risk alienating Russia for missile defence (EU)
New York: Italy has broken with recent tradition and gave euro a hint of stress (Bloomberg)
All of this can be put into context. CNN’s Pierre Thomas has just tweeted out an interesting chart:
Actually we can actually do this here. Credit: William Magnier (@RefFinancial) September 26, 2018
As a quick reminder how the @S&P125 Wr. Ccf PPVL TR series has performed
Through this morning: down 1.40% (since the close)
Through Tuesday: down 1.28%
Through Wednesday: down 1.26%
Through Thursday: down 1.27%
So a late selling rally to trade down another 1.26% as of 5.29pm BST. That’s roughly the level it was at in the first half of the week before Monday’s 1.5% decline.
Now I don’t think we have a full-blown correction going on here. And by far the worst we’ve seen so far is equities in Dubai or Turkey. Stock markets in the US and UK have been best affected by what’s happening globally.
And that explains another element to this sell-off – all of those commodities that we’ve been talking about of late have done pretty well recently and they’re tumbling. For example oil’s falling 0.67% on Wednesday. Corn (which we don’t talk much about) is down 0.74%.
From afar it’s all very ugly. But you have to look at it from the point of view of something being said in the macro environment – like President Trump’s description of US trade with China as a “carve up”. That looks more and more like the markets read that as a comment about actual trade war action, which has clear implications for other trade in which China takes part – like Europe, Japan and the US.
That’s why the US dollar is really struggling here, despite the fact that the dollar index has been supported by the recent decline in equities. Maybe that’s a sign of very quiet conditions.
As for whether Wednesday’s rally actually has legs, which has been part of this is an odd trading week in normal times, I’m not so sure. Normally we would say it’s over the top. And in our business this is all done with a millisecond of observation. But, hey, we’re looking at the annual meeting on Friday and the remarkable performance of mutual funds in recent years and that is a real possibility over the past 10 or 15 years that all of us can remember.
That’s a short look at today’s markets but here’s a long look at the volatility index, the VIX. Apparently this is more closely watched than gold and silver because it’s a proxy for investors seeking protection. So as an indicator of risk appetite, this is a very mixed chart. On the upside – no one’s buying gold or silver – and the wider market has actually moved up slightly on the day.