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In the period after the Federal Reserve statement on Tuesday until the end of Asian trading on Thursday, risk aversion eased with a significant return of confidence in high-yield assets and rising stock markets. The yen and Swiss franc also encountered fresh selling pressure as carry trade activity resumed.

Credit fears have now returned with the announcement that withdrawals had been suspended on three BNP Paribas funds. There have also been rumours of difficulties at German bank WestLB, which have been denied.

In addition, US and European money market rates have tightened with a spike in interest rates and rumours of an ECB meeting to discuss liquidity difficulties.

Markets are still in the very dangerous northern hemisphere Summer period when underlying liquidity is running at reduced levels which increases the threat of erratic and volatile trading. Overall it is unlikely that markets will settle over the next two weeks at least.

Source: Investica

The market’s pretty volatile today with EUR and GBP doing some seesaw starting from a plummet.

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