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Be afraid: Market volatility and the fear index are on the rise

Jake Cordell
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First killer clowns, now market volatility (Source: Getty)

After a surprisingly quiet summer, nerves have returned to the financial markets and volatility is on the rise.

In the UK, the FTSE 100 has moved by more than 0.5 per cent on 10 of the last 13 days and sterling has suffered some chunky jolts back-and-forth, often crashing through multiple resistance points in single trading sessions.

In the US, not only are market watchers contending with the possibility of a Donald Trump presidency, but they are also trying to second guess the inner most thoughts of Janet Yellen as she prepares the Federal Reserve to raise interest rates for the second time since the financial crisis.

On the other side of the world, Asia, too, has been rattled by surprisingly weak trade figures from China. Meanwhile, traders there have been trying to get their heads round the intricacies of European politics following last week's flash crash in sterling which happened on their watch.

All of which has the world economy on edge.

Read more: Will sterling's weakness continue to drive the FTSE 100?

The closely-watched Vix index - often dubbed the "fear index" - has hit a one-month high in the wake Theresa May's words on Article 50.

To be sure, the Vix is still running at one of its lowest levels this year, but the climb from 12 to 17 over the past two weeks is a sign of growing tension.

In addition to just the market indicators, some analysts are running scared.

"Financial market volatility has risen to financial crisis levels, triggered by the hard Brexit and anti-immigration stance of senior ministers at the recent Conservative Party Conference," said Barclays' Andrzej Szczepaniak this morning.

"Such a hard-line stance by the UK government is likely to result in continued elevated volatility for the near term. In our view, increased market volatility will weigh on business sentiment, cutting the post-referendum policy relief rebound short," he added.

FXTM's Lukman Otunuga explained the cocktail of risks stalking the financial markets: "Global stocks have repeatedly displayed instances of extreme sensitivity with shares violently swinging between losses and gains as oil price volatility, fears over the global economy and uncertainty leave investors on edge."

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