Binary Options Daily Analysis – Stocks Tumble on ECB Disappointment

Sep 8, 2011
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Equities
Asian markets slid on Thursday as anxiety grew ahead of Friday’s European Summit. The Nikkei dropped .7% to 8645, pulling back from a 1-month high. The Kospi slipped .4% after the Bank of Korea held interest rates at 3.25%, and Australia’s ASX 200 declined .3%. China’s Shanghai Composite largely recovered from an earlier drop, closing down .1%, and the Hang Seng shed .7%.

European markets tumbled after ECB President Mario Draghi said the region’s economy faced significant risks, while offering no new bond purchase plan. The central bank cut interest rates to 1% from 1.25%. The CAC40 dropped 2.5%, the DAX lost 2%, and the FTSE fell 1.1%, with financials leading the declines. The European Banking Index closed down 3.1%.

US stocks posted similar losses. The Dow fell 199 points to 11998, the S&P 500 skidded 2.1%, and the Nasdaq lost 2%. Selling accelerated in the last few minutes of the day after Germany rejected a draft proposal for the EU summit, casting doubts on the outcome of Friday’s meeting. The ongoing debate over whether to introduce stiffer budgetary requirements, or strengthen the bailout mechanisms, does not appear close to resolution.

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S&P 500 Falls 2.1%

Despite earnings reports which exceeded estimates, Costco fell 2% and Smithfield Foods dropped 3.7%.

Tesla shares plunged 9.7% after Morgan Stanley downgraded the stock.

Treasuries and Commodities
Bonds gained, encouraged by a drop in equities. 10-year notes gained 18/32 to yield 1.97%, and 30-year notes rallied 1 14/32 to yield 2.99%.

Crude oil tumbled 1.9% to 98.58, crossing back below the $100 mark. Gasoline futures fell .5% to 2.574, while natural gas rose .8% to 3.449 after a government report showed natural gas storage dropped significantly more than forecast.

Metals traded lower, once again led by silver, which slumped 2.6% to 31.78. Gold dropped 1.7% to 1714.60, and copper lost 1.3% to 3.511.

Currencies
The currency markets shunned risk on Thursday, pressuring the Australian and Canadian Dollar. The Australian Dollar fell 1.2% to 1.0168, and the Canadian Dollar dropped 1.3% to 1.0218. The Pound and Euro both lost .5% to 1.3348 and 1.5638 respectively, while the Yen closed flat at 77.67.

Economic Outlook
Weekly jobless claims were far better than expected, dropping by 23K to 381K. Wholesale inventories rose by 1.6%, more than forecast, posting their biggest gain in 5 months.

Friday’s economic reports will include international trade and consumer sentiment.

The EU Summit will begin on Friday. Hopes for a quick resolution to the European debt crisis appear to be dashed, as the political disputes continue, but any progress could have a significant impact on the markets.

Earnings are due from Comverse Technologies.