Who’s the first one out the door as markets tank and tremble?
A good question after a crunching night for markets around the world.
Commodity prices suffered their biggest fall in two years last night, but then they also experienced a similar fall in March after the Japanese quake and tsunami, and then rebounded.
So the question for investors is, is this a real correction, or just a clearing out of speculative pressures in many markets?
But the damage being done this time is very real and different in nature to the slump in March.
This time there’s no real reason except that initial plunge by silver in Asia on Monday which we reported about Tuesday morning.
That sell off has turned now into a full blown correction in some cases, such as oil and gold and a rout, in the case of silver, after another round of huge falls overnight Thursday.
The sell off in the Australian dollar continued, it was around $US1.0570, down more than a cent for the second night in row and 4.5c under the peak above $US1.10 reached Monday morning just before the silver plunge started in Asia.
It climbed back of $US1.06 in Asian dealings Friday morning
The US dollar had its biggest rise against the euro after the European Central Bank failed to raise rates or hint at second increase for the year.
Silver lost another 11% overnight (to $US38.96 an ounce) to take the fall in the four days to Thursday to nearly 30%, gold plunged below $US1,500 an ounce to end off $US44.80 (at $US1470.50) or 3% to take the fall so far this week more than $US100 an ounce or more than 6%.
Silver recovered a touch early today to cut the loss to 8%, gold rose and trimmed its loss on the day to $US33.90.
Oil lost 9% Thursday night, our time and is now down more than 10% for the week so far and under $US100 a barrel in New York at $US99.08.
Oil was trading at $US113.93 last Friday in New York.
In fact Brent crude in London, tumbled more than $US10 a barrel overnight, it’s biggest ever fall in absolute terms.
It was a sea of red across the commodity boards with the only green seen in wool futures in Sydney.
Copper, another speculative favourite fell below $US4 a pound in New York for a loss of 3.3%.
In many cases the falls went on through the day with very little respite. Many commodities closed down on or near their lows for the day.
Stock markets had the worst day in Europe and the US for six weeks (since the March 11 disasters in Japan). Europe was off around 1% in general, Wall Street by nearly that.
Some investors had a wary eye on their screens, it was a year ago that the now infamous Flash Crash happened which startled the world.
The CRB commodities index fell 4.8%; its largest daily fall since the GFC more than two years ago.
That has chopped the year’s gain of 10% to around 6%.
On top of that US weekly unemployment figures jumped sharply, surprising everyone and at 474,000 they are now back where they were when unemployment was closer to 10% than the 8.8% they now are.
US bond yields continued plunging as investors sought a safe haven with the 10 year yield now at 3.17%, down from a recent high four weeks ago of 3.62%.
The US dollar jumped last night, having its strongest day for weeks after the European Central Bank overnight, moaned about rising inflation (2.8% annual in the eurozone), but didn’t lift rates.
That continued the pressure on the Australian dollar which lost more ground to trade around $US1.0640 in New York, that’s a loss of nearly 4 US cents since its latest high on Monday, or a fall of 3.5%.
Now all eyes in the markets are on the April jobs report for the US, due tonight.
So if there’s a big jobs report for April in the US will it end this surprise sell off ?
After last night’s selling, you wouldn’t think so.
There is a definite feeling the US economy isn’t accelerating from the first quarter slowdown, but is slowing under the weight of big debts, high unemployment, depressed housing and weak consumer confidence.
The rise in the weekly unemployment claims numbers has been going on now for a couple of weeks and yesterday hit the highest level in eight months.
US economists were surprised and say that in a growing economy with unemployment at last easing, such a big rise shouldn’t really happen.
In fact there’s something of an echo from a year ago.
Market confidence took a hit from April and May onwards last year after Greece was bailed out and the euro came under pressure, while in the US fears grew about a so-called double dip recession.
Now we have a repeat seemingly underway, but with a different trigger in 2011.
The US economy has suddenly got a dose of the wobbles in the minds of many in the markets: the poor first estimate for March quarter growth tapped into that and US bond yields have been falling all week.
There are also fears about the health of the global economy: Japan is contracting because of the March 11 disasters, India bunged up interest rates by a surprise 0.5% to 7.25% this week to try and kill off persistently high inflation, Vietnam cut its growth forecasts and there are continuing concerns about China (which will be tested by the usual monthly data release in the coming week).
And, here in Australia, the economy has definit
