Talking Points:
• Risk aversion is catching traction with the S&P 500 posting its second biggest drop in 5 months
• While the shift in sentiment looks genuine, an unbridled deleveraging requires a few milestones
• High profile event risk lies ahead for the Euro, Yuan and New Zealand Dollar
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After a pause Monday, risk aversion picked up where it left off late last week after NFPs. The S&P 500 suffered its biggest daily drop in two months and the second largest tumble in five months (at the height of the last major market swoon). Looking across the markets, this move reflects a sentiment change rather than an isolated asset convulsion as is evidenced by a drop in many assets with varying degrees of sensitivity to speculative appetites. The question now is whether this is just another adjustment by a market with a short-term trade agenda or a true and lasting shift to delever. It is too early to call conviction, but there are a milestones we can look for to gauge intensity. We talk risk, the unfolding of major fundamental themes and upcoming event risk in today's Trading Video.
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