Financial markets: Fear instead of optimism
This week marks the reversal in the direction of protective tools: growing bonds of US and Japan, as well as noticeably gaining against the dollar the Japanese yen. Market participants to reduce positions in risky assets (stocks and currencies of developing countries) on fears that the preservation of trade conflicts significantly reduce economic activity.
A noticeable shift in expectations has launched the process of profit-taking after a rally since the beginning of the year, one of the pillars of which were hope for a bargain. As is often the case, the maximum optimism was quickly replaced by fear.
The stock market
Key stock indices turned sharply decrease at the auctions in the USA. Intra-day S&P500 lost more than 2.3%, showing the sharpest decline over the past month and a half. The index of fear VIX continued higher, reaching highs since the beginning of the year at 21.75. However, he later corrected to 19.3: in the end, an increase of more than 67% in just two days! Note that the preceding spikes of the VIX values in October and December last year, ended in failures of the S&P500 by 12% and 16.5%, so be on the lookout this time.
The European Commission on Tuesday lowered forecasts on growth of world economy, only reinforced the concern of the markets. However, the reaction of the Euro was limited, since the PMIS earlier in the week was better than expected, noting the relatively good condition of services.
At the start of trading Wednesday, the dollar fell below 110 yen amid a sharp reversal of the markets to decrease. For two weeks, the USDJPY exchange rate fell to 2.2% as increased demand for the currency as a safe haven. Traders largely depend on the progress of the negotiations China and the United States, therefore, we cannot exclude sudden jerks of the pair both up and down.
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