Share Prices & Exchange Rates Today: Analysts Forecast That Shares May Slide As VIX Gains

September 10, 2014 - Written by John Cameron

STORY LINK Share Prices & Exchange Rates Today: Analysts Forecast That Shares May Slide As VIX Gains

Yesterday’s movement for global shares and the VIX Index have lead foreign exchange rate and market analysts to forecast that investor sentiment may be about to take a tumble.

The benchmark broad-based S&P 500 Index breached the 2,000 level for the first time on record on 25th August and has struggled to hold above this psychologically significant threshold in the two weeks which have followed. The highest the key index has reached since the final week of last month has been 2,007, suggesting that investors have little appetite for American shares above the 2,000 level on the S&P.

The price action for the US’s headline share index over the past fourteen days suggests that a key level of resistance has been reached for equities. As with any technical level, a failure to break this band of resistance could send share prices tumbling; alternatively consecutive breaks above this level would send out a strong positive indicator regarding the future prospects for global risk sentiment.

Yesterday’s session saw the S&P 500 index tumble to close to the 1,991 level as investors priced-in the likely effect of a fresh round of sanctions against Russia from the European Union. The new restrictions on Moscow represent a deepening of the punitive measures which are already in place, with a curb on Russian state-owned oil companies’ ability to raise funds on Europe’s bond markets likely to have a particularly damaging effect. While the apparent incursion by Moscow-backed troops into Eastern Ukraine now appears unlikely to escalate into the civil war which commentators had feared earlier this Summer, the prospect of tit-for-tat sanctions between Russia and the West has the potential to curb the tentative global economic recovery.

The impression that investors’ appetite for risk-laden assets was diminishing was increased by yesterday’s move higher in the VIX index which measures the level of protective ‘put’ orders placed by equity traders. The so-called ‘Fear Gauge’ moved off an intraday low of 13.22 to touch 13.73 during trading yesterday afternoon. The forward move of almost 4% suggests that the generalised mood of nervousness may be about to increase into something more. The fact that the Pound registered gains of almost 1% against the risk-sensitive Australian Dollar (currency:AUD) backed-up this theory.

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