Investors dumped U.S. stocks across the board on Thursday, pushing the S&P 500 and the Dow Jones industrial average down more than 10 percent for the year on fears over the health of the global economy. The US dollar hit a 16-month low against the Yen on Thursday and headed for its worst week since the Lehman crisis as investors scrambled for relative safety buying up gold and top-rated bonds and dumping stocks. Gold skyrocketed more than $60 an ounce at session highs on Thursday, surging to its highest level in more than a year hitting a high of $1,263.
Oil prices continued to move lower on Thursday as investors reacted to OPEC’s monthly oil report, which provided further indications of escalating oversupply on markets throughout the world. West Texas Intermediate crude futures settled at $26.21 a barrel on the New York Mercantile Exchange down 4.5% on the day and at its lowest since May 2013.
US Jobless claims fell to a seasonally adjusted 269,000 in the week ended February 6 from 285,000 the prior week, the Labor Department said. Economists had forecast claims falling to 281,000. Claims have now remained below the 300,000 mark, which is associated with strong labor market conditions, for 48 straight weeks.
U.S. Federal Reserve Chair Janet Yellen’s testimony was fairly neutral. She didn’t back off from rate hikes in any way and she alluded to global pressures being a risk for the American economy.
“Yellen made it clear that while the Fed still expects to continue on its gradual tightening path, policy was not on a pre-set course and would respond appropriately to developments,” said Justin Fabo, a senior economist at ANZ.
The USD/JPY fell down to 110.97, its lowest level since October 2014 with unconfirmed rumours of a Bank of Japan intervention. The JPY and the Euro once again benefited from the unwinding of funding positions in equity markets.
The Australian Dollar will be in focus today as Reserve Bank of Australia Governor Glen Stevens speaks. The market is looking for more detail about the likelihood of further rate cuts which could see the AUD/USD dollar resume its slide back below 70.
In the overnight session US retail sales will be a focal point as the markets are looking for a positive print to provide support for equity markets and to help stabilize the US dollar.