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24 Aug 2015
Markets remain on the defensive - ANZ
FXStreet (Bali) - ANZ argues that the main trigger behind the weakness seen in riskier assets, excluding the Euro, is the lowest Chinese PMI in 6 1/2 years published last week, with Fed rate hike odds in Sept reduced to just 1/3 now.
Key Quotes
"Last week was certainly a tough one for equity markets, with major bourses the world over down sharply. The S&P 500 and DJIA are now back over 7% and 10% respectively from their recent peaks. Even a paring back of Fed rate hike expectations is not coming to the rescue this time (although of course there is a chicken and egg to consider here!)."
"In some ways, one could argue that this pull-back was long overdue, especially in the US, as stocks had shown a remarkable (and some would argue unnatural) degree of stability for some time. But even so, it still comes at an awkward period. So what was the main trigger for this weakness?"
"One word; China. On the back of already heightened anxiety over slowing growth, equity market volatility and its recent currency devaluation, manufacturing PMI data on Friday well undershot expectations, suggesting recent policy measures have not stabilised growth just yet. Commodity markets are also not enjoying this soggy demand backdrop at a time of when supply is ample in many cases, and this is further raising deflationary fears."
"Clearly, the Fed has being given plenty to ponder as we approach its critical meeting next month. Markets are now putting the view that a Fed hike is imminent under serious scrutiny."
"Whereas at the start of last week the odds were seen as 50:50, they have now been pared back to just a one-in-three chance, and surely the longer this market volatility persists, the longer those odds will get."
Key Quotes
"Last week was certainly a tough one for equity markets, with major bourses the world over down sharply. The S&P 500 and DJIA are now back over 7% and 10% respectively from their recent peaks. Even a paring back of Fed rate hike expectations is not coming to the rescue this time (although of course there is a chicken and egg to consider here!)."
"In some ways, one could argue that this pull-back was long overdue, especially in the US, as stocks had shown a remarkable (and some would argue unnatural) degree of stability for some time. But even so, it still comes at an awkward period. So what was the main trigger for this weakness?"
"One word; China. On the back of already heightened anxiety over slowing growth, equity market volatility and its recent currency devaluation, manufacturing PMI data on Friday well undershot expectations, suggesting recent policy measures have not stabilised growth just yet. Commodity markets are also not enjoying this soggy demand backdrop at a time of when supply is ample in many cases, and this is further raising deflationary fears."
"Clearly, the Fed has being given plenty to ponder as we approach its critical meeting next month. Markets are now putting the view that a Fed hike is imminent under serious scrutiny."
"Whereas at the start of last week the odds were seen as 50:50, they have now been pared back to just a one-in-three chance, and surely the longer this market volatility persists, the longer those odds will get."