• Equity markets plunged across the board as a spectrum of Black Monday weighs on, IBEX takes a hit as Catalonia-related risks mount
  • NZ dollar leads the losses in G10 following the major (and unexpected) reshuffle at the political scene, GBP declines on feebler retail sales, a safe haven flow underpins CHF and JPY
  • Oil prices decrease despite upbeat remarks from OPEC’s Barkindo and a hefty slide in US oil out-turn

Thursday is the 30th anniversary of the so-called Black Monday when the US stock markets got a massive decline. Admittedly, things have changed since then, a spectrum of this day seems to weigh on equity markets across the globe. As for now, all major indices are massively down while the Hang Seng (HKComp) registered a 2.3% slide. In Europe, the Italian FTSEMIB (ITA40) and the Spanish IBEX (SPA35) are taking a hit the most being down 1.2% and 0.8% respectively. The latter has been depressed on the back of another intensification of the Catalan crisis as the Spanish govt declared that it will consider triggering the Article 155 of the Spain’s Constitution which allows them to take full control over the region when it meets on Saturday. The declaration came on the heels of a warning from the Catalan leader Carler Puigdemont who said that he might declare independence refusing to back down. In effect, the single currency moved down markedly below 1.18 while the sell-off seen in the SPA35 sped up. Since then, the euro has managed to recover making its daily high above 1.1830, the Spanish index hasn’t. A spike was seen at the Spanish 10Y yield as well as it picked up briefly 4bps but erased a gain thereafter.

Moving on to currencies, the NZ dollar has been sold-off thus far in the aftermath of a declaration from Winston Peters, the NZ First Party leader, who chose to endorse the Labour, the decision which is bound to result in the new government consisting of three parties: NZ First, Labour and Green. Although, a minority govt isn’t something rare in New Zealand, it will be the first time when a winner of the election won’t be in a ruling coalition. It means that the incumbent PM Bill English will step down as the Labour leader Jacinda Ardern being the most likely to be named as the new PM. 

On top of this, the we got the gloomy data from the UK economy on retail sales which took the pound down as the high odds for a rate hike as soon as next month were called into question. Beside, JPY and CHF are among top performers within the G10 basket which is a knee-jerk response to the sell-off seen across the global equity markets. Bonds are on the rise today recouping its losses from yesterday. At the time of writing, the US 10Y yield declines 3bps, the German 10Y bund yield loses 1bps while the UK 10Y yield is down a bit more than 3bps.

On the commodity front, oil prices are losing ground today despite a hefty decrease seen in the US production and caused mainly on the back of the hurricane Nate which hit the Gulf of Mexico. Moreover, some remarks from OPEC’s Barkindo didn’t help buttress the oil market. He said that the oil market is rebalancing at accelerating pace and there are signs of a stronger trend. However, he didn’t allude to yesterday’s comments that a 9-month output cut extension might be introduced. As for now, both WTI and Brent are dropping 1.4%.

The sell-off of cryptocurrencies didn’t persist too long. After a bleak session yesterday, Bitcoin has managed to trim all of its losses and now it could be poised to try to establish its new all-time high but firstly buyers have to tackle $5810. Other cryptocurrencies have recovered as well, however Ripple (XRPUSD) seems to be an exception as it’s remained on the back foot so far. Let’s take a quick look at the Bitcoin chart in order to outline a possible future scenario.

Looking forward there are two less relevant report from the US economy as well as some central bank speakers on the agenda.