CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please consider our Risk Disclosure Notice and ensure that you fully understand the risks involved.

Watch VIX in the face of uncertainty

Volatility had characterised the market action overnight and amidst the uncertainty, this will remain the one item on the table to watch.

Risk of recession heightens

Trade concerns and aggressive moves by central banks on Wednesday was seen stoking fears over growth prompting risk aversion in the early hours of Wall Street.

Following the sustained weakness in the yuan against the greenback post Wednesday’s fixing by the People’s Bank of China (PBOC), the Trump administration was again seen lifting tensions with banning agencies from directly buying from Huawei. Over and above the wide swings registered by Wall Street, haven assets such as USD/JPY was seen trading briefly around this week’s low of around $105.60, emphasizing the potential for greater depths should things take a turn for the worse.

Likewise, with bond yields, the gravitational pull had been particularly overt, sending the likes of the US 10-year yields briefly down to the lowest level seen since October 2016. In turn, our familiar recession indicator, the US 10-year, 3-month inversion had further deepened.

To some extent, looking at the peak to present decline of approximately 4.8% for the likes of the S&P 500 index, one would reckon that it is not entirely reflective of the signal that the bond market is sending. This could mean that the worst is not over for the equity contingent. That said, the key driver for this downturn in outlook lies largely with the US-China trade conflict which carries with it significant uncertainties that may be difficult to be modelled by both investors and companies alike. This had also likely been why the first wave of bargain hunters assisted with the return of both the Dow and the S&P 500 index to a near-neutral close overnight.


Aggressive central bank support

With a situation whereby even central bankers may find difficult to assess, we have certainly seen a series of aggressive moves across Asia Pacific on Wednesday. The greater than expected cut by the Reserve Bank of New Zealand (RBNZ) and surprise coming from the Bank of Thailand (BoT) had both spoken in part of the fear of a growth slowdown from the policy makers, but also the shift we may be seeing in greater policy support. This is again another factor to seriously consider as we move forth into the yearend.

As such, amid the uncertainties on hand, look to the likes of the VIX in addition to the haven assets in the near-term. While the volatility index had reversed below the long-term average of 20.0 in the brief state of calm, spikes may well return in the lead up to the September 1 anticipated tariffs implementation with any further escalations.


The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

Seize your opportunity

Deal on the world’s stock indices today.

  • Trade on rising or falling markets
  • Get one-point spreads on the FTSE 100, 1.2 on the Germany 40, and 0.4 on the US 500
  • Unrivalled 24-hour pricing

See opportunity on an index?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on an index?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from one point on the FTSE 100, 1.2 on the Germany 40, and 0.4 on the US 500
  • Trade more 24-hour indices than any other provider
  • Analyse and deal seamlessly on smart, fast charts

See opportunity on an index?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.