Take Five: Vol Squall Coming? World Markets Themes For The Week Ahead

www.oann.com | 4/24/2019 | Staff
Kaliela101 (Posted by) Level 3
May 3 (Reuters) – Following are five big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them.


Volatility - Record - Lows - Backdrop - Investors

With cross-asset volatility at record lows, it’s a great backdrop for investors to load up on risk. Reams have been written on the reasons for falling volatility, but logic attributes it first to major central banks’ recent tilt back into dovishness, and second to the global economy’s tepid but steady expansion with few inflation surprises.

So low is cross-asset vol that a gauge compiled by brokerage INTL FcStone stands 3.6 standard deviations below the mean. In other words, it deems that a vol surge has less a 0.02 percent probability of occurring. And with that has come willingness to go short safe assets such as gold or Treasuries, and on protective hedges such as the VIX. (The latter is a measure of how much S&P500 options are expected to fluctuate, essentially a vol gauge). Outstanding shorts on VIX futures have reached record highs, CFTC data shows, surpassing the build-up seen before last February’s “Volmageddon” blowup.

Market - Watchers - Caution - Volmageddon - Market

Unsurprisingly, some market watchers advise caution. As Volmageddon showed, vol can spike spectacularly in a quiet market, sometimes driven by just one unexpected data point. After all, if the old adage holds, some people may be looking to sell in May and go away.

Data: more important than usual these days as markets try to decide whether the green shoots cropping up in some places are the real deal.

Euro - Zone - Growth - Quarter - Half

Take the euro zone. Growth was faster than expected in the first quarter, after slumping in the second half of 2018. U.S. and Chinese first-quarter GDP surpassed expectations, too, while the Bank of England has just raised growth forecasts for 2019.

So will upcoming data — U.S. and Chinese trade numbers —...
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