25 Aug 2015
Market carnage, mini 'flash crashes' - ANZ
FXStreet (Bali) - ANZ provides a summary of market conditions in the last 24h, noting that behind Monday's flash crashes is yesterday’s sharp falls in Chinese equity indices.
Key Quotes
"Domestic developments are being dwarfed by events offshore, with markets characterised by a renewed bout of risk aversion, extreme volatility and large trading ranges, with mini ‘flash crashes’ everywhere. The catalyst appears to be yesterday’s sharp falls in Chinese equity indices, which ended about 8% lower, with Asian bourses also ending sharply in the red."
"This pessimism has flowed into North American and European equity markets, as participants have had to rethink what is underpinning lofty global valuations. The action of government bond yields, particularly the rise in European yields, was puzzling, suggesting some position squaring is going on."
"Commodity prices have continued to slide, with the CRB index falling to a new 13 year low overnight, which along with further weakness in oil prices tells you something about the demand environment."
"For central banks, the concern is how stock market weakness (if it persists) will adversely affect consumer and corporate behaviour. On top of this, there is the diminished prospects for global growth and the disinflationary impulses transmitted from the pronounced weakness in oil prices and EM currency weakness. Odds for a September Fed hike have been pushed back to just 22%, from close to 50% odds two weeks ago. For those hoping for a quiet day of trading today in the Asian market session, think again!"
Key Quotes
"Domestic developments are being dwarfed by events offshore, with markets characterised by a renewed bout of risk aversion, extreme volatility and large trading ranges, with mini ‘flash crashes’ everywhere. The catalyst appears to be yesterday’s sharp falls in Chinese equity indices, which ended about 8% lower, with Asian bourses also ending sharply in the red."
"This pessimism has flowed into North American and European equity markets, as participants have had to rethink what is underpinning lofty global valuations. The action of government bond yields, particularly the rise in European yields, was puzzling, suggesting some position squaring is going on."
"Commodity prices have continued to slide, with the CRB index falling to a new 13 year low overnight, which along with further weakness in oil prices tells you something about the demand environment."
"For central banks, the concern is how stock market weakness (if it persists) will adversely affect consumer and corporate behaviour. On top of this, there is the diminished prospects for global growth and the disinflationary impulses transmitted from the pronounced weakness in oil prices and EM currency weakness. Odds for a September Fed hike have been pushed back to just 22%, from close to 50% odds two weeks ago. For those hoping for a quiet day of trading today in the Asian market session, think again!"