Abrupt Turn Of Events

One day is all it took for investor sentiment to turn. After showing some short term risk taking on Tuesday, the lack of clarity from Italy and open discussions about the debt levels of the nation began to show up in an oppressive manner in the bond markets. Italian bonds began to see their yields increase to record levels and this sent a shiver through investors globally who began in earnest to flee riskier assets. The EUR saw brutal losses in value and the GBP and AUD followed the Single Currency down the hill. The USD found itself finding favor as a safe haven. The European equity bourses declined and Wall Street promptly dived also. The U.S. major indexes finished with their worse day of trading since mid August. None of the negative trading was spurred on by major economic data. Today will be rather neutral with data also. The U.S. will release weekly Unemployment Claims and Trade Balance numbers. The U.K. will see the BoE issue their monetary policy statement. And there will be some minor reports from Europe including the French Industrial Production results. However, simply put it is the financial crisis in Europe that will be the focus.

A day after seemingly looking the other way and driving equity markets higher and introducing stable EUR trading, investors found themselves flustered by a complete lack of clarity from Italy and Greece. Both countries are being counted on to produce stable political solutions which will help their economic problems, but time continues to pass and it is certain that investors began to show their frustration within the European bond markets which began to be punished. After a huge day of declines on the European bourses and the EUR being clobbered, traders will have to be careful about how they choose to enter the waters today. Risk management is a certainty and a keen ear on rumors which could create whipsaw movements should be used. The broad markets are bound to produce another fast day.

Volumes increased on Wall Street yesterday and the Forex markets were brutally swift. Officials were desperate to try and restore confidence yesterday in the E.U. but it appears that they are more than a few steps behind what is happening on the ground. Interestingly the commodity markets turned in an almost stable day for Crude Oil and it must be questioned now if some of the stability and high prices for Crude are occurring because of speculation via geopolitics. Plenty of concerns continue to mount regarding the economic outlook globally and demand is still definitely in question. Gold is trading around 1756.00 USD as of this morning. The precious metal must be watched carefully. Gold has found itself floundering under the weight of a strong USD the past couple of months. The precious metal appears to be in a rather range bound pattern depending on the particular investor sentiment that is occurring on any given day.

The JPY stayed in a rather consolidated mode a day after picking up value against the USD. The JPY may continue to be a battle ground between investors and the BoJ. The Bank of Japan has a stated weak JPY policy, but as of yet have not been able to scare off investors who still perceive the JPY as a safe haven play.

The broad markets are certain to be volatile today and it must be taken into consideration that volumes may be limited tomorrow because banks in the U.S. will be on holiday. Meaning that some institutions may be positioning themselves today for what will be a long weekend in certain cases. Investor sentiment is fragile and today’s results will likely be quite interesting.