Equity markets and industrial commodities sank in another night of selling. Major indices dropped 1-2% across the Northern Hemisphere. Oil hit 16 month lows. A potential US government shut down and US accusations of Chinese hacking fuelled existing market concerns about economic growth. Bonds and gold rallied, and the US dollar fell as investors shunned risk.

Both explanations of the sell down smack of “after the fact” rationalisation. The negative momentum is a key factor in driving investor behaviour. The fundamental justifications are following the action, rather than triggering it. The selling will finish when it is done.

The Bank of England forecast a slowing in inflation, released alongside its decision to keep UK rates on hold. The BoE highlighted growing uncertainty around Brexit, but currency traders appeared to respond to comments suggesting lower oil prices would stimulate the economy, and drove the pound higher.

Despite the global downdraft Asia Pacific futures markets are mixed to positive. Support for emerging markets featured in overnight trading, and global investors may see value in the more defensively positioned regional markets.

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