Global Selloff Deepens on Risk aversion, Dollar Tumbles

Global stock markets crumbled on Thursday following a painful session on Wall Street overnight that saw U.S. stocks suffer their worst selloff in more than eight months.
Lukman Otunuga

Open your FXTM account today

Global stock markets crumbled on Thursday following a painful session on Wall Street overnight that saw U.S. stocks suffer their worst selloff in more than eight months.

While U.S. President Donald Trump’s renewed criticism of the Federal Reserve for hiking interest rates played a role behind the steep selloff, there were other key factors brewing in the background. It is becoming clear that global equity markets are facing a perfect storm of headwinds such as rising U.S. bond yields, U.S.-China trade disputes, global growth concerns and prospects of higher U.S. interest rates. For as long as these themes remain, an appetite for stocks are likely to diminish further consequently fueling speculation over the bull party coming to an end.

Asian stocks fell sharply during early trade to close in the red while European shares slumped this morning. With the negative sentiment from Asian and European markets deterring investors from riskier assets, Wall Street is at a threat of trading lower this afternoon.

Dollar extends losses ahead of US CPI

It has not been the best of trading weeks for the Greenback which has consistently depreciated against a basket of major currencies since Tuesday.

A combination of factors ranging from President Trump’s latest criticism of the Federal Reserve to general profit-taking has contributed towards the Dollar’s weakness. With the Dollar still supported by confidence over the strength of the U.S. economy and prospects of higher U.S. interest rates, the medium- to longer-term outlook remains bullish. Investors will keep a close eye on September’s pending U.S. CPI reading which could impact rate hike expectations for 2019. Signs of rising inflationary pressures in the United States could prompt the Federal Reserve to adopt a more aggressive approach towards monetary policy normalization.

Solely focusing on the technical picture, the Dollar Index is currently controlled by intra-day bears with prices sinking closer towards 95.00 as of writing. A decisive breakdown and daily close below this level may open the gates towards 94.60.

Commodity spotlight – WTI and Brent Crude

The clear lack of appetite for risk across the board has seeped into oil markets with West Texas Intermediate (WTI) and Brent Crude extending losses on Thursday.

Official reports from the U.S. Energy Information Administration showing U.S. crude inventories rising more than expected complemented the sell-off with WTI trading marginally below $71.80 and Brent approaching $81.00 as of writing. While the combination of risk aversion and easing supply worries may translate to lower oil prices, the downside remains limited by geopolitical risk factors. With looming sanctions against Iran and falling production from Venezuela fueling uncertainty over the global supply outlook, oil bulls have enough ammunition to fight back.

Technical traders will continue to closely observe if Brent crude is able to breach below $81.00. Sustained weakness below this level should provide intraday-bears with enough confidence to challenge $80.20.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.