Learn To Trade
 
Indicators & Chart Patterns

Deepen your knowledge of technical analysis indicators and hone your skills as a trader.

Find your detailed guides here
Trading Glossary

From beginners to experts, all traders need to know a wide range of technical terms. Let us be your guide.

Learn More
Knowledge Base

No matter your experience level, download our free trading guides and develop your skills.

Learn More
Learn To Trade

Trade smarter: boost your skills with our training resources.

Create a live account
Market Analysis
 
Market News

All the latest market news, with regular insights and analysis from our in-house experts

Learn More
Economic Calendar

Make sure you are ahead of every market move with our constantly updated economic calendar.

Learn More
Technical Analysis

Harness past market data to forecast price direction and anticipate market moves.

Learn More
Live Webinars

Boost your knowledge with our live, interactive webinars delivered by industry experts.

Register now
Market Analysis

Harness the market intelligence you need to build your trading strategies.

Create a live account
Partnership
 
Affiliate Programme

Grow your business and get rewarded. Find out more about our Affiliate Programme today.

Learn More
Money Manager

Increase your income and get compensated for your trading knowledge with ThinkInvest, putting you in control.

Learn More
API Trading

Create your own trading platform or data tools with our cutting-edge APIs.

Learn More
Introducing Broker

ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.

Learn More
White Label

We supply everything you need to create your own brand in the Forex industry.

Learn More
Regional Representatives

Partner with ThinkMarkets today to access full consulting services, promotional materials and your own budgets.

Learn More
Partnership

Plug into the next-gen platforms and the trades your clients want.

Create a live account
About ThinkMarkets
 
About Us

Find out more about ThinkMarkets, an established, multi-award winning global broker you can trust.

Learn More
Security of Funds

Security of your funds is our number one priority. Find out more about our insurance policy with Lloyd's of London.

Learn More
Trading Infrastructure

When it comes to the speed we execute your trades, no expense is spared. Find out more.

Learn More
ThinkMarkets News

Keep up to date with our latest company news and announcements.

Learn More
Contact Us

Our multilingual support team is here for you 24/7.

Learn More
About ThinkMarkets

Global presence, local expertise - find out what sets us apart.

Create a live account
search
Create account

Risk appetite slowly turning sour - market correction imminent?

Fawad Razaqzada Fawad Razaqzada 25/03/2021
Risk appetite slowly turning sour - market correction imminent? Risk appetite slowly turning sour - market correction imminent?
Risk appetite slowly turning sour - market correction imminent? Fawad Razaqzada
Europe started with a bit of relief bounce as equity indices rose and the US dollar edged lower. But it remains to be seen whether the bulls will be able to hold their ground, because in recent days we have been getting more and more signs that the appetite for risk is slowly fading away, across the financial markets.

Plenty of bearish signs

Among some of the bearish signs of late, crude oil prices have turned very volatile and copper has struggled, with the metal breaking lower this morning. Meanwhile, the US dollar has been gaining strength and safe-haven Japanese yen has stopped falling against several foreign currencies. Elsewhere in FX, we saw the Turkish lira slump 15% at the start of the week, while commodity dollars have tracked oil and metal prices lower. We have also witnessed how US technology shares have stopped going higher, with global bond prices slumping and yields jumping. But the biggest sign for concern that has not got much attention is the slumping Chinese equity market. The SSS Composite has fallen 10% while the benchmark CSI 300 Index has lost about 17% since climbing to a 13-year high in February.

So, what is going on?

Well, while it is impossible to pin everything on one specific factor, it looks like investors are becoming increasingly wary about the prospects of tighter monetary policy in the not-too-distant future and are thus less willing to hold onto stocks with sky-high valuations. The rebounding US dollar is also weighing on metals and other buck-denominated commodities, as well as some emerging market currencies.

In short, investors are realising that they were perhaps a little too enthusiastic in recent months about taking on risk owing to optimism about a sharp global economic recovery.

Is China leading global markets lower?

The recent poor performance of the Chinese stock market is an indication of what to expect when central banks and governments start ending pandemic-era emergency stimulus measures. In fact, China has been a leading indicator ever since Covid-19 started to spread globally in the first couple months of 2020. As global equities continued to hit new highs, Chinese equities were already slumping more than 10% from their then highs. Then, just as global stocks started to drop sharply, Chinese markets were already rebounding and by the middle of the year equity prices there had soared to new multi-year highs. The rebound was driven by optimism that more stimulus was on the way. As the western governments and central banks also started providing emergency stimulus measures, global equities then started to recover sharply too before some markets such as the US technology sector staged a turbo-charged rally.
 
This year, China’s major stock indices peaked in early February, before dropping sharply - once again moving lower ahead of the global indices. If China is anything to go by, then equity investors in the rest of the world need to be careful.

S&P vs. CSI 300Source: ThinkMarkets and TradingView.com
 
Central banks turning hawkish

Indeed, while the likes of the Fed, ECB and SNB have indicated that their extremely expansionary monetary policies will remain in place for now, we have already seen a few global central banks tightening their belts to stem inflationary pressures. Brazil’s central banks was the first to lift rates last week, before the Turkish and Russian central banks followed suit. Also turning more hawkish having been central banks of Norway and Canada.
Some investors fear that the Fed is potentially underestimating the potential for inflation to overshoot and reckon it will be forced to raise interest rates sooner than it has indicated. If more and more market participants start believing that, then we could well see a more pronounced sell-off on Wall Street and other overpriced markets in the coming weeks.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

Learn more to earn more

our Education center

Related articles:

Risk sentiment positive ahead of US retail sales

By Fawad Razaqzada

15/04/2021

Stocks and cryptos extend rally ahead of bank...

By Fawad Razaqzada

14/04/2021

Week Ahead: April 12, 2021

By Fawad Razaqzada

09/04/2021

South African Daily Newsletter 07/04/2021

By Kearabilwe Nonyana

07/04/2021

US dollar could extend recovery in Q2

By Fawad Razaqzada

06/04/2021

Meet our contributors
Fawad Razaqzada
×
Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
×
Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

Feel confident?

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Back to top