Gold and silver are up, equities and oil are down again. The sentiment on Wall Street was aptly explained from the trading desk of JPMorgan on Thursday: “It’s hard to imagine an uglier morning.”
That statement was made as S&P 500 futures were down more than 40 points, or 2.3%, and the EuroStoxx 50 index is doing even worse, down over 3.5%.
At the same time West Texas Intermediate front-month futures sank to their lowest level since May 2003.
Sovereign bond yields are also tumbling all over the world, except in Portugal, where they are way up.
“The two things markets hate most right now (neg. central bank rates and bad bank headlines) occurred overnight as the Riksbank dropped its rate further into negative territory and SocGen put up bad earnings/guidance,” the traders wrote.
“The combination of those two events, coupled with very fragile sentiment, extreme risk aversion (a function of enormous P&L destruction YTD), Yellen’s testimony (which wasn’t sufficiently dovish or concerned about financial market volatility from the perspective of markets), and Cisco’s cautious macro commentary, are weighing very hard on equities so far Thursday morning.”
JPMorgan’s traders conclude: “Trying to divine the end of the rout is difficult given the globe is in the midst of a series of tightly intertwined, self-reinforcing, and correlated trades and narratives (i.e. oil slumps and drags inflation down with it which prompts central banks to ratchet up accommodation which sinks banks which crushes general market sentiment and the overall price declines tighten financial market conditions and scares corporate execs and actual economic activity begins to deteriorate).”