Morning Market Update June 11: All Fall Down

June 11th, 2013 by

Stocks, bonds, precious metals and commodities are falling all over the world as markets panic over the possible end to quantitative easing. Both the dollar and oil are lower today, while the yen and euro are up.

The global selloff began when the Bank of Japan decided to refrain from additional measures to curb market volatility, and were stoked by Standard and Poors upgrading U.S. debt from “negative” to “stable”. This ignited fears that the days of government-sponsored easy money were drawing to a close.

Not helping matters were the facts that Greek bond yields rose over 10%, and the German Constitutional Court is hearing arguments that the European Central Bank bond buying is unconstitutional in Germany. This would mean that Germany would no longer fund bond buyouts for Greece, Spain, Italy, etc., which would mean the collapse of ECB assistance to these nations.

U.S. Treasury yields hit a 14-month high as Standard and Poors upgraded U.S. debt as stable, reflecting their belief that the economy is improving. The spectre of the Fed reducing or stopping its $85 billion a month purchases of Treasuries and mortgage-backed securities cast a pall over markets worldwide.

Some analysts are saying that the surprise hike in gold import tariffs in India has curbed appetite for the shiny metal, but any decrease in physical demand in the world’s largest consumer of gold likely has more to do with the rupee’s recent free-fall, hitting a record low against the dollar.

Chinese markets are closed today and tomorrow for the Dragon Boat festival, so their physical demand is absent from the commodities market. Worries about the state of the Chinese economy has depressed industrial commodities. Hong Kong stocks fell to a 7-month low overnight.

Lonmin, the third-largest platinum producer in the world, is in contentious labor negotiations with South African labor union Amcu. Violence and wildcat strikes are casting shadows on the supply of platinum, gold, and chrome.

Speaking of platinum, platinum ETFs are reported at a record high, 36% more than the first of the year. The Chinese government has announced approval of two renminbi-denominated ETPs that will trade on the Chinese stock market. No launch date has been announced, but analysts expect a robust demand once they become available.

by David Peterson