At last, some market volatility for all those moaning banks and brokers to trade off and make money.
Falling iron ore prices and share prices on Wall Street, but rising prices for gold and oil off the back of the outbreak of fighting in Iraq, means market volatility will rise, disrupting the stasis of the past few months.
That lack of volatility has bled the trading accounts of the big banks and brokers, generating less revenue, rising losses and job losses.
That has shown up in weak first half figures from the likes of Citigroup, Goldman Sachs, JPMorgan, Deutsche Bank, UBS and Credit Suisse.
Citigroup and Goldman Sachs have already warned about weak trading revenues so far this quarter, but the pick up in volatility could help soften the damage.
in Australia, Macquarie Group, which survived the slowdown in the year to March, reporting far better figures than the market thought possible, will be a share to keep an eye if the volatility continues to rise.
Market volatility has been low as the flood of money from central banks has weighed on markets.
That low volatility has been seen in big falls this year in trading volumes on the ASX and on wall Street and London and major European exchanges.
The ASX has seen double digit falls in trading activity since the first quarter.
Total trades fell 28% in May from may 2013, while average daily trades were down 24%.
On Wall Street, daily trading volumes have fallen under six billion a day – a year ago they ranged from 7 to 7.7 billion shares a day.
Now however, the fighting this week in Iraq has seen concerns rise, especially in commodity markets and the oil market in particular.
As a result a key measure of market volatility rose last night by 8%, bouncing off the seven year low hit last week.
And with the situation inIraq looking pretty miserable, we can expect a rapid rise in volatility in key commodity markets.
US Treasury bond yields fell as a flight to safety reappeared – the yield on the key 10 year security dropped nearly six points to just over 2.59%.
That’s a trend that will continue for as long as the situation in Iraq threatens the rest of the region, as well as the oil market.
And the Aussie dollar charged back above 94 cents and traded around 94.17 US cents in Asian trading Friday morning.
Wall Street had its third successive day in the red on Thursday night, our time, with the Dow shedding more than 200 points over Tuesday, Wednesday and Thursday.
As a result, the local market is going to start low and weak this morning after iron ore prices fell to a 21 month low overnight, and Wall Street sell off.
US analysts say airlines are one sector to watch if oil prices continue to rise – that will increase jet fuel prices.
In Australia Qantas, Virgin and Rex will be the shares to keep an eye on.
The share price futures market was signalling a fall of 28 to 30 points when trading starts this morning in Australia.
The fighting in Iraq again boosted oil and gold prices for a second day.
That will underpin the prices of local gold mining and energy stocks such as Newcrest and Woodside.
The fall in iron ore prices will hit the shares such as BHP Billiton, Rio Tinto, Arrium, Atlas and of course Fortescue Metals Group.
The spot price for iron ore at the Tiajin port in northern China, dropped 2.1% overnight Thursday to $US91.50 per tonne, a 21 month low.
That means iron ore prices are down 3.2% so far this week and 32% for the year so far.
The Dow fell 110.43 points (0r 0.66%) to 16,733.45, the S&P 500 lost 13.88 (0.71%) at 1,930.01, while the Nasdaq Composite Index sank 34.30 (0.79%) to 4,297.63. The Russell 2000 index which covers small caps lost 0.6%.
The Australian market opened lower and was trading around 39 points lower at midday.
July crude oil futures in New York jumped $US2.13, or 2%, to settle at $US106.53 a barrel. That was the highest settlement for US crude since September last year.
In London Brent crude for July futures climbed $US3.07, or 2.8%, to end at $US113.02 a barrel.
Comex gold for August delivery rose $US12.80, or 1%, to settle at $US1,274 an ounce in New York.
Comex July silver on Thursday, rose 36 cents, or 1.9%, to end at $US19.53 an ounce.
