Another month on in 2014 and another battering for equity investors with Japan’s Nikkei Average ending down 4.2% this morning at 14,008 after the USA S&P 500 lost 2.3% last night in its worst trading day since June and hitting an October 2013 low. The CBOE Vix index, the “fear gauge”, climbed 17% to its highest level since late 2012.
The VIX, the volatility index, is up 56 percent in 2014 and is calculated using S&P 500 options expiring over the next 30 days. It moves in the opposite direction to the S&P 500 about 80 percent of the time. The CBOE S&P 500 Short-Term Volatility Index, tracking nine-day options on the stock gauge, has risen 140 percent since January 10th. About 2.38 million VIX options changed hands yesterday, the most ever. The previous record was 1.78 million in October during the US government shutdown.
Nikkei 225
A further sell off was triggered after surprisingly poor data US data from the ISM (Institute of Supply Management’s) manufacturing index showed a contraction from 56.5 in December to 51.3 in January, the lowest level in eight months. New orders dropped from 64.4 to 51.2, the biggest monthly fall since December 1980.
The severe cold weather in the US weather was probably the driver for the weak ISM data. All eyes are on the US non-farm payroll data for January which is released on Friday afternoon for confirmation or otherwise that the US economic recovery is firmly on track.
The S&P 500 lost 41 points, or 2.3% to close at 1,742, 6% below its peak reached on Jan 15. The Dow Average dropped 326 points, or 2.1% to 15,371 with the seventh triple digit drop in 2014. The Nasdaq Composite fell 107 points, or 2.6% to close below 4000 at 3,997.
After falling 45 points yesterday to 6,465, the FTSE 100 is set for another 40+ point decline today according to FTSE futures given the additional decline in the US and Japanese market after the close yesterday.
With equities out of favour with investors seeking safe havens amidst the carnage, bonds rose. The yield on the 10-year Treasury bond was down 9 basis points to 2.58%, the lowest since November 2013. Gold was up $14 at $1,257 an ounce.
After the joys of late 2013, there is a whiff of panic in the air with the sell off spreading from emerging markets to developed markets over the last week or so. Unconvincing or poor data is now an excuse for traders to sell off heavily and those that were selling bonds to buy shares have been caught on the wrong side of the trade. With the market looking expensive at the beginning of the new year, the sell off is certainly throwing up plenty of bargain buys. I’ve been watching the markets for a long time and these sell-offs inevitably happen when you least expect it and with everyone seemingly in love with equities in 2013, despite signs of strong economic activity in 2014, a correction was always due to come. My bet is still that the markets will have a reasonable 2014 and these corrections are an opportunity to enter the market or boost positions in favoured stocks. When others are selling, this is often the best time to buy and after these sort of heavy falls, capitulation looks relatively close unless terrible news emerges from the likes of China. Guessing what will happen with China is a dangerous game with shadow banking, dodgy loans and a slowing economy all lurking in the world’s second largest economy.
More panic selling please……
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
Global equity markets battered with Nikkei 225 dropping over 4% overnight
Feb 4, 2014 at 6:33 am in Market Commentary by contrarianuk
Another month on in 2014 and another battering for equity investors with Japan’s Nikkei Average ending down 4.2% this morning at 14,008 after the USA S&P 500 lost 2.3% last night in its worst trading day since June and hitting an October 2013 low. The CBOE Vix index, the “fear gauge”, climbed 17% to its highest level since late 2012.
The VIX, the volatility index, is up 56 percent in 2014 and is calculated using S&P 500 options expiring over the next 30 days. It moves in the opposite direction to the S&P 500 about 80 percent of the time. The CBOE S&P 500 Short-Term Volatility Index, tracking nine-day options on the stock gauge, has risen 140 percent since January 10th. About 2.38 million VIX options changed hands yesterday, the most ever. The previous record was 1.78 million in October during the US government shutdown.
Nikkei 225
The severe cold weather in the US weather was probably the driver for the weak ISM data. All eyes are on the US non-farm payroll data for January which is released on Friday afternoon for confirmation or otherwise that the US economic recovery is firmly on track.
The S&P 500 lost 41 points, or 2.3% to close at 1,742, 6% below its peak reached on Jan 15. The Dow Average dropped 326 points, or 2.1% to 15,371 with the seventh triple digit drop in 2014. The Nasdaq Composite fell 107 points, or 2.6% to close below 4000 at 3,997.
After falling 45 points yesterday to 6,465, the FTSE 100 is set for another 40+ point decline today according to FTSE futures given the additional decline in the US and Japanese market after the close yesterday.
With equities out of favour with investors seeking safe havens amidst the carnage, bonds rose. The yield on the 10-year Treasury bond was down 9 basis points to 2.58%, the lowest since November 2013. Gold was up $14 at $1,257 an ounce.
After the joys of late 2013, there is a whiff of panic in the air with the sell off spreading from emerging markets to developed markets over the last week or so. Unconvincing or poor data is now an excuse for traders to sell off heavily and those that were selling bonds to buy shares have been caught on the wrong side of the trade. With the market looking expensive at the beginning of the new year, the sell off is certainly throwing up plenty of bargain buys. I’ve been watching the markets for a long time and these sell-offs inevitably happen when you least expect it and with everyone seemingly in love with equities in 2013, despite signs of strong economic activity in 2014, a correction was always due to come. My bet is still that the markets will have a reasonable 2014 and these corrections are an opportunity to enter the market or boost positions in favoured stocks. When others are selling, this is often the best time to buy and after these sort of heavy falls, capitulation looks relatively close unless terrible news emerges from the likes of China. Guessing what will happen with China is a dangerous game with shadow banking, dodgy loans and a slowing economy all lurking in the world’s second largest economy.
More panic selling please……
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.