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Volatility Picks Up, Correction Fears Rife   July 7 - July 11
Fri, 11 Jul 04:36 PM EST/09:36 PM GMT
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- There was much talk about a looming equity correction among market participants this week. Global indices lost ground, very gradually in the US and most of Asia, and more dramatically in Japan and Europe. Trouble at a Portuguese bank midweek drove a brief rash of contagion fears that recalled the darkest days of the euro debt crisis, however the situation ended almost as soon as it had begun. Nevertheless, markets were reminded that unknown risks lurk everywhere as the Fed and the BoE gear up to exit easy policy even as the ECB struggles to deal with Europe's stubborn disinflation and flat growth trends. Alcoa rang in the June quarter earnings season with a strong quarterly report, and Wells Fargo offered a mixed report. For the week, the DJIA fell 0.7%, the S&P500 fell 0.9% and the Nasdaq declined 1.6%.

- Global markets were spooked on Thursday by problems at Portugal's largest bank, Banco Espirito Santo. Trading in shares of BES were suspended after a wealth management affiliate delayed a debt payment. The yield on Portugal's 10-year note surged to 4%, the highest since early April, and the yields on other peripheral Eurozone sovereign bonds pushed higher. Portuguese and EU officials rushed in to reassure markets that the situation was a one-off and the bank claimed to have plenty of capital on hand.

- Volatility trended higher this week, raising hopes that the dull-as-rain trading seen in the last month is over for now. After bottoming out at 10.28 last Thursday, a seven-year low, the CME's Volatility Index (VIX) ticked as high as 13.20, its highest level since mid-May. The volatility index is still 14% below its one-year average of 13.9 and has closed below that level for 49 days, the longest streak since 2007.

- Crude prices continued to slide, with the front-month WTI contract gliding from $103.70 to close o ...
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