Binary Options Analysis – Wester MarketsTumble on Contagion Fears

Sep 8, 2011
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Binary Options Trading analysis written by Bradley Welcher - BinaryOptionStrategy


Equities

Asian markets rose, lifted by hopes that the announced resignation of Italy’s Prime Minister would help in stabilizing the country’s debt crisis. The Nikkei rallied 1.2% to 8755, but Olympus shares continued their freefall, dropping by 20%. In Korea, the Kospi ticked up .2%, despite losses of more than 4% in market heavyweights, LG Display and Hynix Memory. Around the region, the ASX 200 gained 1.2%, the Shanghai Composite rose .8%, and the Hang Seng shined, jumping 1.7%.

In contrast, European markets dropped, as concern over Italy took center stage. Yields on Italy’s 10-year notes crossed above 7%, signaling the market has little confidence in the country’s ability to pay its debts. The DAX and CAC40 both fell 2.2% and the FTSE shed 1.9%.

The selling pressure intensified in the US with the Dow tumbling 389 points to 11780. The S&P 500 plunged 3.7% and the Nasdaq dropped 3.8%, as the VIX rocketed up 31% to 36.16. News that Greece’s government had failed to agree on a new prime minister added to the European debt fears.

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The Dow Tumbles Nearly 400 Points

HSBC shares fell 8.7% after posting a 36% drop in profits. Macy’s shares sank 5.3%, and GM shares tumbled 10.9% even though both companies beat profit estimates.



Treasuries and Commodities

A $24 billion auction in 10-year notes had a high yield of 2.03% and bid-to-cover ratio of 2.64.

A flight to safety pushed bonds higher, with 10-year notes up a full point to yield 1.97%, and 30-year notes up 2 11/32 to yield 3.03%.

Commodities posted significant losses thanks to the broad selloff. In energy, Gasoline dropped 2.2% to 2.6466 and crude oil declined .8% to 96.03, despite an unexpected drop in oil inventories.

Copper led metals lower, dropping 3.9% to 3.394. Gold shed 1.7% to 1768.80, and silver lost 3.5% to 33.925.



Currencies

The Dollar soared as fears of contagion sent the Euro down 2.1% to 1.3546. The Australian Dollar, representative of the risk-trade tumbled 2.3% to 1.0150. The Swiss Franc shed 1.6% to 1.1001, and the Pound fell 1.1% to 1.5920.



Economic Outlook

Political instability in Europe is threatening to make solving the debt problems even more challenging, and is raising the likelihood of a global recession due to contagion.

Wednesday’s economic data was positive, but buyers failed to notice. Wholesale inventories fell last month for the first time in nearly 2 years, and weekly mortgage applications rose.

Thursday’s reports will include international trade, import and export prices, and weekly jobless claims.

Earnings are due from Disney, Kohl’s, Nordstrom and Nvidia.