Markets had a wild week – ANZ

In view of Philip Borkin, Senior Economist at ANZ, it was a wild previous week for markets as equity markets have been in a head-spin on the realisation that abundant global liquidity conditions were not going to last forever.

Key Quotes

“The previous period of abnormally low volatility now seems all but a distant memory. Right now contagion into other markets seems somewhat limited (corporate bond spreads have only widened modestly, and off historically tight levels; currency markets have been relatively stable). However, it is this contagion that is key to watch as it will ultimately determine the broader flow-on to financial conditions and the real economy. A brief and confined event will be quickly forgotten. A broader risk off event that tightens financial conditions meaningfully will not.”