Equities lower on debt worries

After yesterday saw markets tumble yet again, today’s open has been no different as banking stocks weighed on the global markets and dragged equity, and currency markets down first thing. We also saw hikes in Italian and Portuguese bond yields as concerns mounted over the state of the European financial sector, in the wake of yet another global economic slowdown. Adding to the downside in Europe was industrial output from Germany which plunged lower with exports showing yet more signs of a worsening situation in the Eurozone.

There is a feeling that we have seen this all before as markets find any reason to dive lower. Oil prices have managed to find a some support at $30 and have stopped being the driver for the majority of downside in global markets. Weakness in China and the divergence in central bank policy is causing financial institutions to worry about the strength of the global economy and the banks’ ability to fight off any further slowdown, and with many European banks worried yet again about debt it has caused the rush from risk into safe havens. The worry for central banks is that they are running out of ammunition to fight low inflation and stagnant growth, and with Janet Yellen due to testify tomorrow afternoon there is a chance that, as ever a lot could be riding on her comments. The market is starting to price out any more rate hikes from the Fed in 2016, let alone at the March meeting. Anything from Janet Yellen that confirms or denies that thinking will see markets react as the feeling that the Fed acted too early in December continues to grow.

Safe havens have pushed higher and I expect that to continue for the rest of today’s session as uncertainty around the global economy continues to drive investor decisions. Gold prices have jumped to highs from last September, but look to be briefly holding at the higher levels at $1,190. With very little due for release on the economic calendar later this afternoon it will be the general news flow that will dominate proceedings until the wholesale inventory numbers at 3pm. Overall banks and debt are yet again the dominating force, we all feel like we have been here before, we just hope it doesn’t end the same way.