As noted yesterday (Look Out Below!), the sovereign debt default warning by the nation of Dubai (UAE) has caused some turmoil.
It is the excuse to send the Yen to a multi-decade highs, rally the US dollar, pressure stocks overseas, and pound the US Futures. Futures on the Standard & Poor’s 500 Index are down ~3%. Gold is down $26, while Crude oil fell nearly $4, and is back under $75.
In terms of exposure to Dubai, JPMorgan Chase & Co. writes that the Royal Bank of Scotland Group underwrote more loans than any institution to Dubai World; In terms of capital at risk, HSBC Holdings has the most in the United Arab Emirates.
Emerging Markets Index fell 2.6%, Asian Pacific Index slid 3.3%, while South Korea’s Kospi slumped 4.7%%.
FORECAST for the day (A/K/A my wild ass guess): This is the sort of day that last year would have produced a down 500+ points situation. For the past 6 months, a deep opening gap down has brought buyers out of the woodwork. But its half a day, and I’m not sure if there will be time for that. My gut says that we end up closing down 100 or less on holiday volume (minus 40 would be ideal).
If that is wrong, and the US markets close down 2% or worse — lots of technical damage done to key trend and support lines — than Monday could be a blood bath. But that is the lower probability outcome IMO.
Enjoy the day . . .