The Stock sell off is dominating the markets as US stocks tumbled the most since the Brexit vote. This might be a warning sign of more volatility ahead as markets are catching up with the possibility for a September rate hike and geopolitical tension in Asia due to north Korea’s powerful nuclear test. Adding to the uncertainty is also Presidential Candidate’s Hilary Clinton’s health problems. Focus this week will be the US retail Sales (Thursday) and the BoE Rate Decision and meeting (Thursday).
Currencies: The price action during the Asian session was subdued, despite a stock market selloff. Last week, the USD rebounded from 2 week lows on Friday, as comments by FED members boosted the chances for an interest rate hike in the near term. The USD suffered huge losses earlier when ISM service report indicated the biggest drop in the services sector since 2008. Investors are currently pricing a 24% chance of a rate hike in September and data leading to this announcement will be critically watched.
Stocks: At the close in NYSE, the Dow Jones Industrial Average lost 2.13% to hit a new 1-month low, while the S&P 500 index lost 2.45%, and the NASDAQ Composite index lost 2.54%. This was the biggest one-day decline since the Brexit vote on June 23rd. This morning, Asian bourses also followed through with Nikkei dropping 1.51%. Most Asian and Arab stock markets are closed today, Including Indonesia, Singapore and Malaysia due to the Eid Muslim holiday.
Oil and Gold: U.S. crude oil dropped 1.79% to $45.06 a barrel and Brent oil eased 1.60% to $47.24 a barrel. Last week, oil prices fell 4% on Friday as the dollar rose and traders discounted an unexpectedly large drop in U.S. oil stockpiles as the beginning of a broader trend. Gold is also softer, having traded as low as $1324.90 an ounce on the back of a stronger Dollar. Support is at $1321 while resistance lies at $1339.