Bears are back as Japan's Nikkei has officially entered bear market territory. The Nikkei 225 closed 20 per cent below its May 22 high.
Traders are still nervous about the possibility of the US Fed tapering quantitative easing. Just the idea of an end to cheap money (however unlikely this seems right now) has panicked markets.
CMC Markets' Michael Hewson:
Despite the fact that it remains unlikely that either the Fed or the Bank of Japan are likely to start reining back on their stimulus measures any time soon, investors appear to have decided that the mere prospect of an exit strategy is enough of a reason to look at pulling money off the table on a fairly comprehensive scale.
Soc Gen's Kit Juckes:
Central bankers may have viewed the pick-up in market volatility as 'normal' or 'a blip' until today but after Japanese foreign asset flow data showed continued repatriation of money (sales of foreign bonds and equities) the Nikkei has suffered an awful session. My lame strategy (yen, NKY and JGBs are all untradeable) stays in place. Abenomics is doing better in econ data than in markets now.
We're now expecting European markets to open down, with FTSE futures falling dramatically overnight:
#FTSE100 overnight lows 6220 - called it Jun 5— Mike van Dulken (@Accendo_Mike) June 13, 2013
Amended FTSE call, set to open 84 points lower at 6,215— Michael Hewson (@michaelhewson) June 13, 2013