Investors avoid riskier assets

Investors continued to scale back investments in riskier assets as European Governments seem to be lacking a common position on how to resolve the debt crisis.

European stock markets on Friday dropped to a six-month low and the Chinese stock market is now the worst performing in Asia being down more than 10 per cent year to date. The euro, which has been taking the brunt of the selling in currency markets, found some support after hitting 50 per cent retracement of the 2000 to 2008 rally at 1.2160 versus the dollar. Persistent talk of Central Bank intervention, most noticeably the European Central Bank and the Swiss National Bank also helped euro off the lows. Risk adversity is still at elevated levels with many having to scale back investments in order to cover losses. The popular saying "sell in May and go away" is back this year as most investors expect a bumpy ride over the next couple of months.

The Reuters Jefferies CRB index has suffered a 12 per cent fall since the April highs with losses seen across the board apart from small gains on gold, coffee and natural gas. Last week we saw heavy losses in platinum and palladium after investors have built record positions in the metals decided to take profit. Platinum reached the February low at 1452 before finding support. Many traders were away from their desks last week due to the annual platinum week in London. This had cut liquidity even further.

- The author is Senior Manager for CFD and Listed Products with Saxo Bank. The views expressed are his own

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