Stocks and Major Currencies as Pessimism Continues to Dominate on European Debt Crisis Fears

By FXEmpire.com

Rising concerns from the European debt crisis and signs of slowing growth in the United States economy continued to boost demand for lower yielding and safe assets on Thursday, where investors fear Italy and Spain will be the next victims of the European debt crisis, and traders are now focused on the U.S. jobs report, which is due on Friday, and expected to show job growth remained weak as the economy seems to be losing momentum.

The Bank of England announced on Thursday it decided to leave the benchmark interest rates unchanged, while the BOE also left the asset purchases program unchanged as well, while the European Central Bank left the benchmark interest rates unchanged as expected, nonetheless, the ECB Chairman, Jean-Claude Trichet, announced the ECB will start a six-month operation to inject liquidity in the markets in order to ease the tensions amid growing concerns from the European debt crisis. The ECB also signaled that inflation risks remain to the upside, which provided gold with support to rise.

Meanwhile, the Bank of Japan announced earlier on Thursday, it intervened in markets to weaken the Yen in order to support the economy, which boosted demand for safety including gold, and that continued to provide gold prices with more bullish momentum to set a new record high above $1681 an ounce.

The U.S. Labor Department released the jobless claims for the week ending July 30, where jobless claims came slightly below expectations at 400,000 down from 401,000 in the prior week and better than expectations of 405,000, however that didn’t improve confidence in markets, since investors are already focused on Friday’s jobs report from the United States.

Stocks in the United States extended the drop by opening on Thursday, where the Dow Jones Industrial Average was down by nearly 1.40% to trade around 11,730, while the S&P 500 index was down by nearly 1.70% to trade around 1239. European stock indexes were also lower before closing on Thursday, where FTSE 100 was down by nearly 2.20% to trade at 5461 and the DAX was down by nearly 1.80% to trade around 6520.

The U.S. dollar rose back against a basket of major currencies on Thursday, where the U.S. dollar index was trading at 74.95, compared with the opening level at 74.41. The Euro fell sharply against the Dollar, where the EUR/USD pair traded at $1.4138, compared with the opening level at $1.4349, and the British Pound also fell against the Dollar, where the GBP/USD pair traded around $1.6318, compared with the opening level at $1.6436.

Gold prices continued to rise on Thursday to reach a new record high above $1681 an ounce, where gold was trading around $1680 an ounce, and crude oil prices extended the losses to trade around $90 a barrel.