Overnight equity markets in Europe were a little bit soft, but didn't really turn ugly until after New York opened. The headline culprit for the angst appeared to be plunging stocks in Greece (which lost 4%) and all the associated problems with uncertainty over the lack of a new government there. However, I think that was just an excuse for markets to do what they were primed to do.
In the first 90 minutes here our indices lost about 1.5%, with Europe a little bit worse and virtually everything red. Perhaps this was a delayed reaction to last weekend's political events, but with the prevalence of computerized trading, trying to make sense out of short-term action is next to impossible.
Caution: You-Turns Ahead
There is no shortage of reasons why stocks might want to tank, and in doing so help set the stage – along with weak economic data – for QE3. This is yet another example of the perversity of markets. For the third year in a row we are getting the weakness – which brings easing – just before the easing itself. It is amazing how markets get you to do the opposite of what you had planned right before what you expected to happen actually happens.
In any case, after the early plunge the market began to lift, and by day's end the Goldilocks crowd had trimmed the losses to about 0.5% or so.
Away from stocks was the scene of quite a good deal of violence. Commodities of all stripes were slaughtered, bonds predictably rallied, and the dollar was higher, as the euro once again temporarily broke before $1.30 (a supposedly important round number).
Metals Turning Extra Heavy
As for precious metals, they were smoked again, as both gold and silver lost a couple of percent (despite huge Chinese and soon-to-be rekindled Indian demand). Metals stocks were worse than the metal (once again). With the benefit of hindsight, a case can be made that the action of the miners has been predicting the weakness in the metals themselves, as they were declining rather ominously on no particular bad operational news. This maybe stating the obvious, but I think we will know when this metals correction has ended when the miners and gold itself rally vigorously together.