European Trade: The strong selling wave from the commodity market dragged equity markets lower overnight. The European shares posted sizeable declines from the outset, while the Japanese benchmark index fell almost 5% tonight.
Oil declined for a sixth consecutive day, shedding every gain made since the beginning of the year. The declines seen in the commodity markets, especially the oil market, have had a strong influence over the major indexes, since the raw material companies are among the largest in the world.
However, investors should also see the bright side of cheaper commodities. First, it means products are cheaper to fabricate, increasing the profit margin (or allowing bigger cost reductions) for manufacturers. This is very good news for the manufacturing sector, which is affected by the falling demand from the credit crunch. Secondly, it means gas will be cheaper, something that is felt in people's pockets. Thirdly, cheaper gas will be reflected in CPI reports across the globe, giving some additional room for central banks to operate, and thus helping the economy recover faster.
The Nikkei fell 422.89 points (4.79%) to 8,413.91, after the Japanese stock market was closed for business yesterday. The Australian S&P/Asx fell 28.70 points (0.78%) to 3,654.60. The U.K. Ftse fell tonight 70.20 points (1.59%) to 4,355.99, while the German Dax lost 85.54 points (1.81%) to 4,634.08. U.S. futures have also been dragged lower overnight.
Crude oil tumbled substantially during the last day of trading, despite the Gaza conflict. Crude oil for February delivery fell $1.20 to $36.30.
Gold extended the plunge seen the day before. Bullion for immediate delivery fell another $4.80 to $818.10.
Previous Asian trade: The equity markets remained driven by fear and risk-aversion in tonight's Asian session. Asian markets fell for a fourth day, driven lower by commodity stocks and automakers.
The strong selling from the commodity markets has taken its toll on the world's financial markets. Commodity stocks lead the declines tonight, as a large part of the companies' profit is directly connected to the price of raw materials. Carmakers continued to tumble, as it seems the economy would stay in a contraction phase longer than expected, delaying even more the industry's comeback.
In addition, the yen's rise in the last few days might have affected in a negative yen, which tumbled tonight in the Japanese markets. Some investors foresee a very poor earnings season in Asia this year, as demand has taken a strong plunge in Europe and U.S., the preferred markets for the local exporters.