European and US shares fell in overnight trading as crude oil prices dropped. The “after the fact” explanations point to reports OPEC will ease restrictions in response to falling production in Venezuela and Iran. The problem with the explanation is the reports are at least two days old.

Similarly the notion that the cancellation of talks between North Korea and the USA cruelled market action is fanciful. The reality is that hopes for Korean unification will enter their nineteenth year on June 15, the anniversary of the North-South Joint Declaration in the year 2000.

There is a general rejection of the true nature of markets. The evidence of behavioural finance studies indicates market prices are a function of human behaviour, and therefore subject to human strengths and weaknesses. Sometimes even professional investors become nervous, fearful, and subject to panic. The simpler explanation for the falls in growth exposed markets is nervousness after a strong run. The lift in gold and bond prices, and the falls in key industrial commodities such as oil and copper, point to a general sentiment shift rather than any specific triggers.

Reports of weak German GDP provide further evidence of the sentiment shift. The quarterly and yearly numbers are actually in line with forecasts, according to Bloomberg. Stronger than expected German private consumption and capital investment, and UK retail sales, are ignored. This is an example of confirmation bias, where only the evidence that supports a hypothesis is reported.

This presents both an opportunity and a problem for Asia Pacific investors. The current action could be characterised as a pull-back in an upswing in global growth and markets. There could be a looming buying opportunity. The problem is that sentiment swings are unpredictable – they could linger or evaporate. The regional response today may determine the short term future for markets.