Global equity markets tanked to end the third quarter as worries over financials dragged down shares across the world. The Dow finished lower by about 2.2% while the broader indexes suffered more severe gains as the S&P 500 fell by 2.5% and the Nasdaq sank by 2.6% for the day. Losses were pretty much throughout all of the sectors although some big cap names in the services space such as Wal-Mart, and those in the health care sector, such as JNJ and Merck, managed to beat out the market on the day. Commodity trading was much more mixed as gold rose by about five dollars an ounce and oil plunged, sinking by about 4.2% to finish the quarter. Trading was also pretty brutal in the grains market as soybeans, corn, and wheat, all finished the day lower by at least 4% with corn and wheat sinking by over 6%. Copper also continued its recent slide as the red metal capped the third quarter by falling 12 cents a pound, leaving the product just 12 cents above the $3/lb. level.
In currency trading, the dollar surged when taking a look at the U.S. dollar index, largely thanks to a two cent gain against the euro and smaller moves against the yen and the pound. The dollar also gained against the franc and Canadian dollar, marking a pretty good end to the week for the greenback in this tumultuous stretch. Unsurprisingly, given the broad ‘risk-off’ trade in the marketplace, yields on Treasury debt slumped in Friday trading. The two year saw yields decline by about two basis points while the ten year saw yields decline by nine, pushing yields down to the 1.91% mark.
One of the biggest ETF winners on the day was the S&P 500 VIX Short-Term Futures ETN (VXX) which soared by 7% in today’s session. This heavy demand for the ETN representation of the ‘fear index’ came as investors sold equities across the board to close out the quarter, preferring to hold onto cash before redeploying assets to start October. Losses were especially bad in the financials space as a number of lawsuits against major institutions led shares of JPM, C, and GS sharply lower. These worries over the financial sector, coupled with the ever-present European troubles, made investors reconsider equity investments pushing many into safe havens of all types to close out the week [see charts of VXX here].
One of the biggest losers on the day was the iShares FTSE China 25 Index Fund (FXI) which slumped by 6.3% to close out the week. Today’s losses were largely due to bearish manufacturing data from the nation as the HSBC Purchasing Managers Index came in below 50 for the third straight month, suggesting more contraction in the key space. Meanwhile, prices seem to be on the rise as well, as input prices rose to a four-month high of 59.5, further adding to the woes of the Chinese economy. Thanks to these increases, some are worried that annual inflation could pick back up in the near future forcing policy makers to raise rates in order to stop this from impacting consumers as well. With these worries in the background, investors continued to flee Chinese assets across the board, pushing this popular fund to a terrible end for the third quarter [see holdings of FXI here].
Disclosure: No positions at time of writing.