Asia on Monday kicks off a pivotal week for world markets which includes policy decisions from the Bank of Japan and Federal Reserve, U.S. employment data, inflation numbers from Australia and South Korea, and purchasing managers index reports from around the world.
Coming on the heels of the previous week’s volatility, investors’ nerves will be taut. Will the scramble to reduce risk continue, or has last week’s selling opened a window of opportunity to rebuild risk exposure and carry trades?
Financial conditions have tightened thanks in large part to the widespread equity selloff, but they are coming from a low base – according to Goldman Sachs. U.S. financial conditions earlier this month were the loosest in two years.
Emerging market financial conditions are also tightening, even though U.S. yields and the dollar have slipped, and implied volatility in stocks, bonds and currencies are higher too.
