Market volatility: It’s not the economy - Nomura


Analysts at Nomura argued that as tempting as it is to find explanations for the recent spate of market volatility in macro news-flow, they are not biting. 

Key Quotes:

"There is little evidence from incoming data to suggest the world economy is on the brink of a major slowdown phase."

"Indeed the latest swathe of growth data has – on the whole – remained pretty firm and generally surprised expectations on the upside."

"The incoming inflation data in the meantime have been well-behaved. Insofar as equity markets have typically tracked growth and inflation surprises quite closely in recent years, it’s reasonable to suggest that markets may have over-reacted relative at least to the fundamental news-flow."

"There are however a few data points that are more concerning. Last week’s flash PMI surveys from the eurozone were very disappointing and that has found an echo in further evidence from some Asian economies to suggest that world trade growth is decelerating. This contrasts with other data from e.g. China, along with more forward-looking flash PMIs from Japan and the US that suggest trade growth is still holding up fairly well. It contrasts with nearly every data point moreover that suggests the US economy more specifically remains in rude health and is still reaping the benefits from very accommodative fiscal policy."

 "We should expect the downside risks to growth elsewhere to climb. This is a near-inevitable consequence of a more mature phase of the (US) economic cycle, where fiscal largesse is combining with firming wage pressures and where monetary policy normalisation is removing the liquidity support to those economies that have hitherto been in great need of it (e.g. in EM)."

"The eurozone’s present fragility – as Mr Draghi argued at the ECB press conference last week – is in some respects a hangover from the burst of unexpected activity last year. But countries such as Germany that are running very large current account surpluses are also now being hit hard by heightened protectionism, by higher oil prices and possibly a deceleration in China’s domestic demand. And the absence of much monetary ammunition at, for example, the ECB to deal with these issues and growing market concerns at the ability of some countries (e.g. Italy) to deploy fiscal ammunition is a more understandable source of market volatility."

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex News

Editors’ Picks

EUR/USD pressured around 1.13 after jump in US jobs

EUR/USD is trading around 1.13, down after US Non-Farm Payrolls shocked with a leap of 2.5 million jobs in May, contrary to all projections. The greenback is gaining while stocks are falling, a correlation breakdown. ECB stimulus previously supported the euro.

EUR/USD News

GBP/USD retreats from highs

GBP/USD is trading below 1.27, off the highs. The pound is struggling after Chief EU Negotiator Barnier reported little progress in Brexit talks. Robust US jobs support the dollar.

GBP/USD News

XAU/USD retreats further to $1670, lowest in five weeks

Gold prices are falling sharply on Friday on the back of the US employment report that boosted equity markets and sent US yields to the upside. XAU/USD is losing more than $40 on Friday and recently bottomed at $1670/oz, the lowest intraday level since May 1.

Gold News

Institutional demand exceeds Bitcoins supply

Greyscale floods the market with fresh money to satisfy the demand of its clients. Investors, willing to pay a 29% surcharge for exposure to Bitcoin without suffering the legal and operational inconveniences. Market remains at risk on the verge of new bullish territory.

Read more

WTI rallies above $39 as focus shifts to OPEC+ meeting

Crude oil prices built on Thursday's modest gains and rose sharply on Friday boosted by the upbeat market mood optimism surrounding Saturday's OPEC+ meeting. 

Oil News

Forex MAJORS

Cryptocurrencies

Signatures