U.S. equity futures were suggesting a slight bounce after yesterday’s sell-off but are beginning to show weakness. Although yesterday’s rout may have been caused by poor economic data out of China, today’s activity may be dominated by the Crimean crisis, as representatives of the U.S. and Russia will be meeting in London. U.S. Secretary of State John Kerry warned that the U.S. would take action on Monday if Washington is not able to establish a dialogue with Russia before then. The statement caused investors to become more cautious. Option volatility spiked higher yesterday as the CBOE ‘fear gauge’ (VIX) rose 12%. Stocks fell over 1% and investors were buying protection across the board in the option markets.
The fixed income markets are little changed after a somewhat choppy overnight session as bonds are slightly higher. The 10-year Treasury yield is holding at 2.64% after dropping sharply yesterday on the ‘Risk-off’ trade. Spillover from the U.S. equity slide weighed heavily on markets overseas with Japan's Nikkei falling over 3% and European bourses solidly in the red too. Yields are likely to remain depressed heading into the weekend and the referendum (Sunday) in the Crimea. Despite the importance of the data, today's reports on PPI and consumer sentiment may be overlooked.
Stock Stories:
Microsoft (MSFT) –What’s Up? – According to the company’s founder, the computer software giant stated they would have bought the WhatsApp Company that Facebook purchased. Bill Gates did say the price was too high but realized the importance of the user base. MSFT shares are down slightly ahead of the opening bell.
