The mid-week optimism over the Fed’s decision to leave stimulus untouched came to a crashing thud on Friday night, with the Dow taking a major beating.
The blue chip index suffered its worst single session in over a month after two Fed Presidents both argued in favour of tapering stimulus fairly quickly.
Their comments directly conflicted with the Fed’s decision not to taper, sowing confusion among investors, who are again none the wiser on when central bank officials will actually begin scaling back stimulus. In company news, Blackberry shares plunged 17% after reporting a whopping $1 billion second quarter loss amid weak sales of its smartphone.
The Dow Jones slumped 186 points (-1.2%) to 15451, the S&P500 let go of 12 points (-0.7%) to 1710 and the Nasdaq dropped 14 points (0.4% to 3775. Friday night’s losses detracted from an otherwise positive week for US markets, with the S&P500 scoring a 1.3% gain over the five sessions.
There was little cheer on European markets, with the UK FTSE falling 0.4% to 6596, the German DAX declining 0.2% to 8676 and the French CAC closing down 0.1%.
Commodities mirrored the slide in equity markets, with gold tumbling 2.7% to US$1333 an ounce as traders began to price in an October start date for stimulus tapering.
Oil also closed sharply lower, pressured by the hawkish comments from the two Fed Presidents and reports of an imminent deal between the US and Russia that will eliminate Syria’s chemical weapons and avert another Middle Eastern conflict. The US dollar recovered slightly against its major rivals but was still down heavily over the week.
Our dollar slipped below 94 US cents with today’s action likely to be shaped by the latest Chinese HSBC Flash PMI reading, due out at 11:45, AEST. There is no major domestic economic data due for release today