I never would be arrogant enough to nominate myself as ‘brain of Britain’ nor am I ‘knuckle-head of the year!’ However I have seen some crass decisions made by market regulators in my time, but none as stupid as the NYSE invoking Rule 48 ahead of this morning’s opening, with a view to preventing a disorderly opening of the market. Call me daft, but that kind of decree could have actually triggered an unruly ‘sell-off!’ – Ridiculous!
At 2.30pm I won’t say that the market obliged, but it certainly did not deter ‘sellers’ from leaving their hallmark on the occasion. At 3.15pm the DOW was down 355 points (2.3%), having shed 10% in value since its high in the early summer. The NASDAQ is also down 10% from its high.
It is easy to level criticism or blame people/institutions for the damage inflicted on market. However, I am sorry to say that until the FED steps up to the plate and makes a decision on interest rates – one way or another – and the Renmimbi devalues to a sustainable level, there will be no ‘peace in our time’ and volatility will prevail. 16th/17th September cannot come fast enough. We are all heartily sick and tired of the prevarication on this decision – will the FED? Won’t it? It pains me to say that ‘forward guidance’ is becoming counterproductive. A decision at this given moment in time would be better than none at all. The FED should probably invoke a symbolic 25 basis point hike in an attempt to wean the US off zero rates of interest which would put the dampeners on any excessive asset bubble bursting. However if the FED’s policy was not isolationist as usual, then there should be no change.
At the time of writing the FTSE is down 195 points at 6051 – down 3.1%. Oil is down by an average of 3%, mining by 6% and drugs by 3%. The sector that has surprised me the most has been banks, which temporarily this morning fell under the radar. They have been flagged up since lunch – Barclays -3.5%, HSBC -4%, RBS -4%, Lloyds -2.75% and Standard Chartered -4.5%. Until the authorities make a decision, leave your tin hat at hand!