Financial markets offered a muted response towards Mario Draghi’s speech in Germany on Wednesday. Investors who were expecting fireworks left disappointed after the ECB chief maintained a safe distance from market-sensitive remarks.
U.S. equity markets kicked off the week on a positive note, ending a two-day fall which sent the S&P 500 to its lowest levels since 11 July - total declines of 2.6% from the 2,490.9 peak were recorded on 8 August.
Less than a month ago the CBOE volatility index – known as the best indicator of fear in the markets – dropped to a record low of below 9. The declines were a result of steady equity markets, low trading volumes, and optimism that the markets were heading higher. This has all changed in the past two weeks, with the fear index rallying from a low of 9.52 to 17.28 – an 81% spike in 4 days from Aug 8 to Aug 11.
The yen traded slightly lower against the dollar early on Thursday, after the BoJ kept interest rates on hold and pushed the deadline for it to reach its inflation target for another six months. As widely anticipated the central bank kept key policy rates at -0.1% and a 10-year government bond yield target of around 0%.