U.S. Index Futures Fluctuate After Stock Slump as VIX Crosses 50
U.S. stock-index futures fluctuated after a rout that on Monday sent the Dow Jones Industrial Average to its worst-ever point plunge. E-mini futures on the S&P 500 Index expiring in March dropped 0.3 percent as of 7:36 a.m. in New York, after earlier erasing a slide of 3 percent to rise as much as 1.4 percent. Those on the Dow fell 1 percent, while Nasdaq 100 Index contracts slipped 0.2 percent. The Cboe Volatility Index climbed as much as 35 percent, poised for its highest close since March 2009. “The correction and its severity could attract some buyers, especially if the selloff carries on for the rest of this week,” said Mohamad Al Hajj, an equity strategist at the research arm of investment bank EFG-Hermes Holding Co. in Dubai. “The SPX is down around 8 percent from the Jan. 26 peak, futures markets seem to be very volatile as well. Volatility will probably remain elevated as eyes will be on the Fed March meeting.”
Dollar climbs as world stock markets slide further
Currency markets showed far less of the panic movements gripping equities on Tuesday, with the dollar gaining slightly and traditional safe haven currencies like the Swiss Franc and the Japanese yen struggling to hold on to earlier gains. The sell-off across world stock markets sent investors rushing into the dollar on Monday, helping the U.S. currency bounce amid a period of prolonged weakness against the euro, British pound and commodity-linked currencies. But in early European trading on Tuesday the moves were less pronounced. The dollar rose slightly, including against the euro, with the single currency 0.1 percent lower at $1.2358, down from the daily high of $1.2435. The yen, which tends to attract investors at times of market stress, rose but gains were muted. The Japanese currency was up just 0.2 percent against the dollar by 1157 GMT,, having earlier climbed as much as 0.7 percent to hit a one-week high.
U.K. Consumer Spending Rises as Cost of Essential Items Climbs
U.K. shoppers boosted spending in January as they paid more for essential purchases. Consumer spending climbed 3.9 percent from a year earlier, Barclaycard said in a report on Tuesday, an increase driven by higher prices and supermarket purchases. In a separate survey, the British Retail Consortium also cited higher food prices as it reported a 0.6 percent increase in like-for-like retail sales last month. Spending flagged in the latter half of 2017 as the pound’s drop since the Brexit vote pushed up the inflation rate. The reports Tuesday indicate some resilience as the initial hit from the vote subsides, tying in with surveys in January showing increased confidence among consumers and businesses. Official data also indicated growth and employment ended the year on a firmer-than-expected footing. Coupled with above-target inflation, the somewhat brighter outlook has raised speculation that the Bank of England may raise interest rates again as soon as May after the first hike in a decade last year. Still, the reports also suggest that consumer optimism isn’t pervasive. Barclaycard’s survey showed a drop in confidence in the economy, with almost half of respondents concerned that Brexit talks will leave them worse off. Both noted struggles in discretionary spending as Britons cut back on non-essential purchases.
Asian Stocks Took Their Cues From the U.S, Wiping Out 2018 Gains
Asian equity markets tend to track what happens in the U.S. more than most, and Tuesday was no exception. Just a few hours after the late-in-the-day plunge that saw the Dow Jones Industrial Average slide as much as 6.3 percent, bourses over the other side of the world started to open, taking their cue from New York to provide Asian traders with their own white-knuckle ride. By the end of Tuesday, Japan’s Nikkei 225 Stock Average — more closely correlated with the U.S. than other markets in the region — had entered a correction, while the Hang Seng Index in Hong Kong was down the most since 2015, as gauges of volatility throughout Asia spiked. As U.S. index futures signalled another session of pain ahead there, the MSCI Asia Pacific Index was down 3.5 percent as of 4:25 p.m. in Hong Kong, concluding a three-day rout that erased an advance this year that topped 8 percent. “This is a test of nerves,” said John Padilla, head of equities at Metropolitan Bank & Trust Co. in Manila. “But if you look through the chaos valuations have become reasonable so it’s a good opportunity for the strong-hearted. The bias has been for investors to stay cautious and wait for the selloff to blow over.”