Global markets look set to experience more volatility this week as a number of factors continue to exert counter flows on market sentiment. Friday’s trading saw a sea of red again across global stock indices with the Dow and S&P once again entering negative territory on the year, the Nasdaq was down over 2% after Amazon and Google reported disappointing earnings numbers. The dollar dropped off from recent highs later in the day after a mixed bag of data and some squaring flows into the weekend, however it’s still sitting near yearly highs and further haven flows during the week could see it much higher.
There is plenty of potential for further moves this week with a plethora of economic data due for release, the Bank Of Japan and Bank Of England’s latest meetings as well as the ongoing Geo-Political factors that have been swaying sentiment so much in the last few weeks. Sentiment does look like it’s going to continue to dominate market direction in the short term and investors will be playing close attention to the news wires in the weeks ahead. Earnings season continues with some major companies set to release data and political tensions in the US, Italy, Germany and the UK will continue to add to volatility in their respective markets as well as contributing to overall global flows.
Currency traders will once again be monitoring the Aussie and Yuan closely today as the Asian session gets moving. The Aussie had tumbled to fresh yearly lows on Friday and looked set to drive down through 70 cents, before staging a strong surge back later in the day. This move coincided with a significant rally in the Yuan, the two currencies have had a very strong correlation over the last year, which had also been making fresh lows on the year.
We are set for a mixed start again in Asia for the stock markets with investors hoping for some upside after what was a torrid last week. In terms of data, it’s relatively quiet today with probably just the Net Lending numbers in the UK and the Core PCE Price Index data in the US set to be major risk events. However, event risk will start to build as we move through the week and start to see more tier 1 data releases as well as central bank rate decisions, before culminating in the latest US Non-Farm Payroll data on Friday.