Daily Market Update 19/03/2008 - New York Session

New York Session
Published: March 19, 2008 5:34 PM

Gold and oil were creamed today, with each losing around 5-6% on the day, as speculative positioning continues to be reduced in the face of ongoing financial market uncertainty. The 'de-leveraging' of open positions also saw the USD continue to recover against most other major currencies, with the notable exception of the JPY. EUR/USD fell to as low as 1.5580/85 after earlier peaking out around 1.5780/85. USD/JPY came under fresh pressure as the JPY-crosses, like EUR/JPY and GBP/JPY, the backbone of the 'carry trade', were pummeled on the back of falling stock markets, dropping from as high as 100.45 overnight to close around 98.75 in NY. US stock indexes gave back most of the gains following yesterday's Fed rate cut, with the S&P 500 losing about 2.4% on the day, despite better than expected earnings from a Key investment bank and the successful IPO of the largest US credit card issuer. Energy and mining companies led the way lower in shares as oil and gold prices plunged. Oil fell from just below $109/bbl to $103/bbl at its lowest before closing around $104.50/bbl. Gold prices fell to earth from an intra-day high of just over $996/oz., limping out at the end of the day just above $940/oz.

The 'de-leveraging' of hedge funds and other asset managers is being driven by reduced credit and tighter collateral requirements imposed by banks, forcing asset managers to exit open trading positions. Heightened volatility accompanied the unwinding of such trades, leading to sometimes chaotic price movements across all markets. Ongoing financial market uncertainty is likely to lead to further large market swings, especially as trading liquidity thins out going into the Easter Holidays this weekend. Japanese markets are closed on Thursday due to a national holiday.