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Global Equities Continue to Sell Off on Syria Concerns

By: Minyanville
Posted: 8/27/2013 5:00:00 PM
Referenced Stocks: EXPR;JOY;TIF;WSM

Emerging markets continued their brisk sell-off overnight leading to further declines in other developed markets. Indian, Thailand, and Indonesian stock market indices were all down more than 3%. Additionally, the Indian rupee made a new low against the US dollar at 66.19. Other emerging market currencies like the Turkish Lira and Mexican Peso reached new record lows against the dollar.

European markets opened in the red and continued to fall throughout the day. The Spanish and French indices were the worst performers, down more than 2.4%. The UK FTSE 100 (INDEXFTSE:UKX) only fell 0.79% on the day alongside strong gains in the country's government bonds.

US markets were under pressure in the pre-market following worries over military action in Syria. Yesterday afternoon, Secretary of State John Kerry kicked off the potential for military action against Syria in a speech. Today, media reports indicated that the Obama administration was planning an imminent military strike against Syria that did not include a no-fly zone or ground troops. The S&P 500 (INDEXSP:.INX) finished down 1.59% and the Russell 2000 ( INDEXRUSSELL:RUT) was down 2.41%, both at the lows of the day. Total exchange volume clocked in at 9.6 billion shares, below the 50-day average, and not indicative of capitulation. Financials were the worst sector, falling 2.33%. Tech, industrials, and materials sectors also finished in negative territory.

Crude oil rallied strongly, up 2.8%, touching the prior high for the year at $109.32 before settling to close slightly lower. Treasuries got off to a slow start, but rallied very strongly following a $34 billion auction of 2-year notes. Direct bidders represented 26.1% of the auction, the most since April. This was viewed as a positive for the market as the 10-year rallied by as much as 4 basis points. Gold rallied 1.5% today, the other component of the fear trade with crude oil.

Tiffany ( TIF ) reported earnings before the market opened. Earnings-per-share beat at $0.83 vs. $0.74 estimates, but revenues missed at $926 million vs, $942.4 million estimates. The company guided higher on full-year EPS, up to $3.50-$3.60 vs $3.53 estimates. On the earnings call, however, the company said it expected to see a modest decline in US sales for the rest of the year and that higher-end jewelry sales outpaced lower-end sales.

Tomorrow's Financial Outlook

Weekly mortgage applications, via the Mortgage Bankers Association, will be released in the morning. Last week, total applications fell 4.6% and are down 44.4% from the prior year. July pending home sales will be released at 10:00 a.m. ET. Economists expect sales to remain unchanged from the prior month and up 7.9% from the prior year.

In global market-moving news, the GfK institute will release its consumer confidence survey for August. Today, the IFO's business climate index rose to 107.5 for August from 106.2 in the prior month. Other economic data includes China's leading economic indices for July and UBS' Swiss consumption index.

Major US earnings reports tomorrow include Joy Global ( JOY ), Express ( EXPR ), and Williams-Sonoma ( WSM ).

Twitter: @Minyanville