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No markets or asset class has been spared
Markets finished last week much the way they started; worried about the impact of a sell-off in emerging market stocks and currencies. No market has been spared last week since slowing global growth always brings with it a global impact. The devaluation of the Yuan calls into question the validity of quantitative easing from the likes of the European Central Bank as a functioning policy. Stocks in Europe have rallied this year because of QE’s effect of weakening the euro which helps exports. That only keeps working so long as every other country sits back and doesn’t act to devalue their currency to compete. Since PBOC’s move on the 11 August, a whole chain of events had infected global currencies, stock markets and commodities as each asset class take their turn to be punished. Mrs Yellen though, who gets to bat next, will continue to keep the market guessing. The slide in the Dollar Index is starting to signal a push out in the Fed rate lift-off. Could commodities then enjoy a technicality and offer a bounce off their lows here? Will the Saudi’s panic, suggest a production cut, offer Oil a floor? With the weekend’s break, one could expect calm to return to financial markets in the early part of this week - that is, once early Monday morning gap down jitters are conquered. The horizon though remains unsettled. With the weekend’s rumbling between the two Koreas’ possibly developing deeper into a volatile situation, Asia and emerging markets continue to remain a place to avoid, especially amongst the Index and ETF’s complex.
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