Volatility Spiked Globally Lead by Economic Concerns in China and War in Ukraine

Global financial market saw intense volatility amid growth fears in China and hawkish stance of the Federal Reserves to fan down inflation.

In the U.S. the Vix index climbed to the highest Lebel since mid-March on Monday and edged higher by 1.48% as of reporting.

U.S Treasury yields broke three weeks slump trading as much as 14 basis points lower while broad based currencies fluctuated near to its highest in a month.

As China heads toward mass testing and lockdown in parts of the country – added worries to investor’s sentiment besides authorities failing to assure sufficient policy support to revive the economic slump.

“Now you’re going to have high inflation — and slower growth because of China,” said Matt Maley, chief market strategist at Miller Tabak, as reported by Bloomberg.

The MSCI Emerging Market Index closed down 2.6% for an eighth day of declines, the longest streak since July 2021.

The prospect of shuttered cross-border supply chains caused by intensifying lockdowns in China threatens a “profound global economic recession,” according to Carl B. Weinberg, chief economist at High Frequency Economics.

Market wary is more pronounced in the foreign exchange market with the Chinese yuan dropping to its lowest level in 17 months before paring losses. The British pound is as well at its lowest level since September 2020.

While the Japanese yen jumped to its highest level of volatility since April 2020. Meanwhile, traders are awaiting Bank of Japan’s meeting to change the bank’s yield curve control.

“The spike also comes with a fairly sharp turnaround in Treasury yields which have been critical to driving USDJPY higher,” said Mazen Issa, senior foreign exchange strategist at TD Securities, referring to the rise in yen volatility.