The market’s ability to reverse any risk appetite at the moment indicates that we are not at the bottom yet of the current downward spiral. Chinese indices are 6% lower overnight, Japanese over 2% in the red and oil is back below 30 bucks a barrel. Volatility has been rising throughout the year so far but we’re still someway off the big spike in the Vix (volatility index or ‘fear gauge’) last August and so there’s potential for moves in markets to get even more dramatic.
The week builds up from today on the economic calendar front and the focus will be on central banks from tomorrow onwards. The Federal Reserve has confirmed that its FOMC meeting is due to go ahead tomorrow after concerns the recent snow storm would postpone it, then on Friday the Bank of Japan makes its latest monetary policy decision. Data releases from the US today will put the FOMC in the spotlight as we see the Case-Shiller Home Price Index expected to rise from 5.5% to 5.7%, after that the Markit services and composite PMI figures and then consumer confidence due remain stable at 96.5. Also worthy of note is that the Bank of England Governor Mark Carney speaks to the UK parliament at 10.45 GMT so we could see some movements in sterling. He’s been very dovish of late and along with the background concerns over the UK referendum on EU membership, the outlook for the pound remains bearish, having weakened some 7% on a trade weighted basis since mid-December.