The equity markets and commodity markets continued to sell off this week as the dollar was the beneficial of flight to quality. Continued concern over potential rate hikes in China, the confirmation of Ben Bernanke and comments made by Barack Obama over trading account in US commercial banks where on the minds of investors. The 3 day slide in the US equity markets was the largest slide in the past 12 months.
Political rhetoric is creating a lot of trepidation in the market place, but there does not seem to be anywhere for investors to hide. For the day, the S&P 500 Index was down another 24 points to 1092. The banking sector, which can be measured by looking at the exchange traded fund (NYSE:XLF) lost almost 7% of its value this week, on the back of comments from Barack Obama.
In Europe, the debt situation is beginning to get very ugly. News of the fiscal blow out in Greece weighed on Greek debt instruments and cost of insurance against default (credit default swaps) rose. Interest rates have soared in Greece; the premium over Germany widened sharply; the cost of insurance sky-rocketed—to roughly twice what it was at the start of December. The situation in Greece is weighing on other debt instruments and creating an albatross around the neck of the rest of Europe.
In the commodity markets WTI crude oil had a horrific week after the Department of Energy Release worse than expected inventory data on Thursday. Total motor gasoline inventories increased by 3.9 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. The consensus estimate was for a 1 million barrel build. WTI slid $4 dollars per barrel this week.