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Risk-Off Spreads, Commodities Drop Undermining Stock Markets

CROSS ASSET
  • Pervasive risk-off becoming increasingly evident across assets this morning. Asian equities and commodities were already lower at the European open but losses have accelerated in recent trade, with Bloomberg noting that Iron Ore prices have extended losses to 10%.
  • Catalysts and drivers are varied, with some citing China's intentions to 'aggressively' reduce steel production (thereby trimming demand for iron ore, a key input)
  • Lower commodities prices have undermined mining, materials and energy stocks across Europe, with all major European markets off 1.5% or more. The likes of Anglo American, BP and ArcelorMittal are among the hardest hit, with losses of as much as 11% shortly following the open.
  • As such, no surprise to see commodity-tied FX lower, with AUD, NZD and CAD the poorest performers in G10.

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