SocGen Rumours Damage Markets, Latest om Premium Trades

Rumours about banks and sovereign ratings set off another market plunge on Wednesday. NZD, AUD and CAD lagged, USD and JPY were far out ahead of the rest of the market and gold touched above $1800. We examine all the rumours and discuss the safe havens that continue to work no matter the market conditions. All 8 trades of Ashraf's Premium Intermarket Insights hit their targets. See link below.

The absence of economic news on Wednesday will filled by a proliferation of rumours. The result was another massive plunge in stocks with the corresponding falls in risk FX. The S&P 500 fell 4.4% to 1120.

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The UKs Daily Mail and Zerohedge set off a viscous wave of speculation about the demise of SocGen that was further fueled by the Twitterverse. The Daily Mail later apologized and said their report was not true. Reuters also debunked a rumour that SocGen leaders met with French PM Sarkozy this morning.

Bank rumours are a despicable thing to trade around; first, because Lehman, Bear Stearns and the rest are still fresh in everyones mind; second, because its impossible for banks to prove the rumours are false and; third, because if the rumour proves to be true it is already far too late to avoid trading losses.

The rumour morphed into an imminent downgrade of France, which all the ratings agencies quickly shot down.

Bank of America was also in the crosshairs on reports its trying to raise capital. This rumour appears to have some legs as Reuters reported late in the day that the company is in discussions to raise $17 billion with the sale of a Chinese unit. It now appears somewhat likely that Bank of America rumours will persist in the days ahead.

A volatile market is fertile ground for rumour-mongering. When markets get volatile, fundamentals ALWAYS take a backseat to speculation and sentiment. Its one of the reasons that volatility almost always precedes declines in risk assets.

The one shelter in the latest market rout has been precious metals. Gold touched $1800 today and closed up $50 to $1786 the fourth largest one-day gain ever. Silver gained 4.7% to $39.50. Remember that this happened today amidst a rallying USD; the gains against other currencies were even more impressive.