No one was safe.
First, the scoreboard:
The top stories:
– Stock, bonds, commodities, and currencies around the world got destroyed.
– The Australian dollar was down below US$92c – a dramatic fall for the currency that many analysts thoughts would hit $US90c within a year.
– Today’s calamity was really an extension of yesterday’s sell-off, which appeared to be triggered by comments made by Federal Reserve Chairman Ben Bernanke. Specifically, he said that the Fed could begin to taper, or gradually reduce, its quantitative easing program as early as later this year. In other words, they would be scaling back on their monthly purchases of $85 billion dollars worth of mortgage bonds and Treasury securities.
– This sparked a sharp sell-off in the bond markets, which translates into higher interest rates. Earlier today, we saw the 10-year rate go as high as 2.47%, a level we haven’t seen in years.
– The next big devastating headline that crossed was that manufacturing activity in China decelerated more sharply than expected in June. This is worrisome because China is the world’s second largest economy and also it’s most important source of economic growth. “A good deal of the weakness was apparently driven by external developments as the new export orders index plunged 4.9pt to 44.0, the lowest reading since the middle of the Great Recession,” said Societe Generale’s Klaus Baader. “This collapse is quite difficult to fully believe, given developments in the region and the global economy, where there are no signs of such a collapse of demand.”
Commodities got demolished:
– WTI crude oil prices are down 2.9%
– Natural gas prices are down 2.0%
– Gold prices are down 6.5%
– Silver prices are down 8.7%
– Copper prices are down 3.0%
– Corn prices are down 1.7%
– Soybean prices are down 1.9%
Brazil and Turkey were among the countries that got punished today. Here’s a round up of some emerging market debt that got smashed:
– Indonesian 10-year yields are up 56 basis points to 4.76%
– Russian 10-year yields are up 46 basis points to 4.14%
– Turkish 10-year yields are up 46 basis points to 4.60%
– Mexican 10-year yields are up 17 basis points to 3.76%
– Brazilian 10-year yields are up 14 basis points to 4.11%
The scale of the sell-off is stunning.
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