Global stock markets experienced a tough day on Friday as weakening growth expectations and poor data weighed on risk sentiment. Asian indices had traded relatively calmly but the rot set in during the European session and continued through to the end of the New York day. The Nasdaq closed down 2.5% with the S&P 1.9% in the red and the Dow not far behind closing negative 1.77%. In the currencies, the dollar gained as the Euro took a hit on poor data and the pound bounced back once again on softer Brexit hopes. Several bond market indicators are pointing towards recessionary conditions across the globe and this is adding to the investor pessimism across the markets. Gold was relatively stable on the day, grinding higher again to close near 1313 and Oil drifted lower, WTI around $59/b and Brent at $67/b.
There’s not too much out this week in terms of fundamental data releases or central bank action, but the markets do feel poised for more volatility. Brexit will continue to bring volatility to the sterling and UK markets with new twists occurring on a daily basis and investors will focus closely on the US-China trade situation as once again US negotiators are set to visit Beijing later in the week. Friday’s price action across the equity markets and especially in the US session seemed a strong message from the market that the recent dovish tilt from the Fed won’t be enough to support them in the current environment and investors seem to be preparing for significant corrections across the financial spectrum. Bond markets in particular are flashing warning signs with treasuries pushing higher and some inversions occurring along the curve, US 10 year yields closed the day down at 2.44%.
Looking ahead to today’s trading sessions and it’s very quiet across the day in terms of fundamental data releases or major speaking events. In light of this, investors are set to follow the sentiment from Friday’s trading session and traders are expecting a ‘sell rallies’ environment until we have the next catalyst to push us in another direction.