thoughts from an IG analyst in todays paper. If i had the balls to buy for a trade then next day might be the time, gotta find them first!
9:34am: Today has all the hallmarks of being one of the worst trading days of the past five years, writes IG's Evan Lucas: In the post GFC world, fear-selling is now stronger, faster and harder than ever before, and now there's another pressure to it – are central banks out of tricks?
Emerging markets will be the epicentre of the fear selling as deflationary fears and growth-less economy fears produce GFC-like volatility with China taking the lead on that theory.
The reaction from Asia today will be symptomatic of the current investor sentiment and belief that a hard landing is inevitable (something I don't buy as China has a plethora of leavers it can pull to slow this down) will only heighten capital outflows.
However, no major action was taken by China over the weekend which means Asia will be left largely to its own devices this morning.
The Fed is also the other risk to EMs and the risk of rising US-denoted debt leading to capital outflows, coupled with half decade low commodity prices is not a good mix. However, this is sentiment-driven and that drives fear even harder. Therefore, by the end of the week, expect to see a bounce as it will be overdone.
The current trading conditions will likely lead to a new coined market term 'Hike Hysteria' or 'China Crumble'. Both seem very appropriate in the current conditions.
