Biggest Risk Facing the Financial System is Emerging Markets

Equities

The major indices suffered through another volatile week, but Thursday’s market action offered some respite for the major indices, with the S&P 500 leading the way, closing up 1.24%  against the prior session. Despite this single-day bump, the indices still find themselves running behind their opening week performance, and year-to-date, the overall markets are net negative, with the Dow Jones in particular down 5%.

The biggest risk that is facing the financial system is the emerging markets, particularly in Asia as Chinese financial and manufacturing data continue to reiterate bearish sentiment, while the Japanese Nikkei 225 has suffered enormous volatility, down nearly 11% year-to-date. Both regional powers are nervously eyeing a potentially dovish statement by the European Central Bank and a positive jobs report from the U.S. Labor Department to provide a much-needed spark to their respective stock markets.

While economists polled by Reuters are expecting a 150% improvement in the U.S. employment numbers, Japan’s Daiwa Securities warns that another soft month could devastate global equities. With so much hanging in the balance, investors are urged to consider protective measures for their portfolio.

Currencies – No Currencies this week

Winners & Losers

The winner for this week is Sprint, ticker symbol S :  

  • Sprint was able to buck a 6-day losing streak with an 8.4% move on Wednesday, placing it at number 7 of the top 10 stocks traded on the New York Stock Exchange on that day.
  • A large contributor to Sprint’s single-day performance are rumors that it’s close to securing a $45 billion dollar debt financing deal in preparation for a takeover bid for T-Mobile. Earlier this week, Sprint and the FCC likely met to discuss the merger, which previously faced public resistance from government officials.

The loser for this week is Radioshack, ticker symbol RSH :

  • Investors dumped out of Radioshack en-masse on Tuesday and Wednesday, leading to a total loss of more than 10%.
  • Despite a hilarious re-branding message that was aired during the Superbowl and one that was well received by the general public, Radioshack could not quell the rumor department, with news leaking out that 500 stores are at risk for closure.

Precious Metals

  • Gold Bullion

    Although it was a relatively slow week overall for the precious metals, gold did get off to a fast start on Monday, moving up 1.2% at the COMEX as macro-economic unease, particularly centered on the emerging markets, pushed money into safe-haven assets. On Thursday, gold closed at $1,257, essentially flat against the prior as traders wait in anticipation for the release of the jobs report.

  • Silver Bullion

    Silver also started the week on a positive note, but its biggest move came on Wednesday when it popped up 2% primarily due to technical short-covering. Thursday’s market action saw it move up a quarter of a percent to close 5 cents shy of $20 dollars. 

  • Palladium Bullion

    Finally, palladium saw a positive 1% move on Wednesday, which helped put a stop-gap to 11-straight down days. Global economic concerns have been weighing heavily on palladium, which is primarily an industrial metal tied to the fortunes of cyclical names.

 

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