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S&P Futures Decline amidst Dramatic Moves in Asian Markets

The Standard & Poor’s 500 Index’s e-mini futures that are set to expire in June fell by 1.3%, prior to cutting back on these losses to 0.6%, in Tokyo.

S&P Futures Decline amidst Dramatic Moves in Asian Markets

Equity-index futures in the U.S. declined further, causing investors to wonder what triggered the massive selling move.

Over the past 100 days, the contract has fallen lower than its average price, causing the selling to increase. As of April 1, the volume of equity-index futures was approximately thrice higher than the five-day average. Meanwhile, Dow Jones Industrial Average futures lost as much as 0.6%.

Nader Naeimi, a fund manager for Sydney-based AMP Capital Investors Ltd said, “I cannot point to anything that would have triggered this. I guess that’s just how big corrections often begin. The fundamental reason will come out later.”

Investors are keen on U.S. equity positions within international portfolios as they await the government’s monthly employment reports and as Alcoa Inc., the world's third largest producer of aluminum, begins its earning season in a week’s time.

Naeimi indicated that investors should expect more volatility within the equity market. Currently, fund managers are trying to predict when the Federal Reserve will increase interest rates as this will impact U.S. stock.

As of April 1, the U.S. dollar declined against other major global companies.  In Asia, most of the stocks fell, with Japan leading the pack. Meanwhile, Chinese equities rallied amidst a continuously expanding manufacturing sector.

Worldwide futures trading patterns

At the start of the markets on April 1, e-mini futures were 0.1% lower down at 2,058. For the first few hours of trading, the futures hang around a four-point level.

In Tokyo, in the early morning hours of trading, the contract began paring lower and lower, prior to an all-out loss, with futures plunging down by as much as 11.75 points. As all this happened, investors bought and sold over 13,500 contracts.

Typically, in the early hours of trading, trade volume is at a high peak. However, this time it was comparably lower in Asia than the volumes in U.S. and Europe.

On March 31, the S&P fell by as much as 0.9% in New York, causing a reversal in a market that has more than doubled in six years. The S&P’s three-month gain of 0.4% fell short in the major economies as futures benchmarks in Europe gained 16% and the Topix index in Japan rose by 9.6%.

Norihito Fujito, a top invest strategist at Mitsubishi UFJ Morgan Stanley Securities Co. said, “We are still not at a point where we have entered a large-scale sell off. However, the lack of clarity over rate hikes is having an adverse impact on U.S. stock.”

Fujito added, “Presently, there is a profit to be made by hedge funds that have stacked up their position.”



Market Impact

As of April 1, Dow Jones Industrial Average futures fell by 97 points down to 17,604. Meanwhile S&P 500 index futures declined by 12.3 points down to 2,048.25 and the Nasdaq-100 futures declined by 28.50 points to 4,300.25.

As U.S. and Asian stocks slumped, investors were less eager to trade in riskier investments.

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