Are we on the cusp of the next selloff?

With the FTSE 100 already down 100 points in the session, it looks like another difficult day for global markets.

London
Source: Bloomberg
  • Indices crash lower despite recent positive fundamental announcements
  • Could we be on the cusp of the next major selloff?
  • Volkswagen scandal hits rivals after emission admission

With the FOMC meeting and Greek elections both resolving in a positive manner for financial markets and global stability, it would make sense that we saw some form of relief rally in response. However, the weakness seen since Thursday's Federal Reserve decision is highlighting a high possibility that we are due to embark on yet another major selloff in global indices.

Gone are the days of bad news is good news, now even traditionally good news for markets is deemed another reason to sell and it makes you wonder what the response will be to an eventual hike.

Economic announcements are thin on the ground this week, leaving market direction largely to technical considerations. With the FTSE 100 tumbling over 120 points in two hours this morning, it is becoming clear that there is a distinct possibility of yet another crash in financial markets.

The steroids of monetary policy may have brought us to heights previously unseen in global markets, yet as the Federal Reserve and Bank of England begin wean us off this artificial high, we are coming to find ourselves perilously exposed to another major selloff.

The wheels have fallen off for Volkswagen whose shares continue to tumble in the wake of yesterday's scandal which saw the German car manufacturer admit to fixing its emissions tests in the US markets. The issue here is one of reputation and coming from a rich pool of reputable and reliable German carmakers, this could take the sheen off a previously untouchable industry.

Today's selloff across the German automotive sector has seen competitors such as Audi, Renault, Daimler and Porsche all suffer major losses today. The question on everyones mind is, if Volkswagen is doing it, the likeliness is that they all are. This guilt by association will persist until those companies intervene.

Ahead of the open, we expect the Dow Jones to start at 16,360, down 150 points from yesterday's close. 

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