What a difference a day makes

Wow. This time yesterday, equities were bid only, carry was on fire, and you were lucky to find an offer in EM. Thanks to yesterday's midday selloff in US equities, carry has been caned, commodities are collapsing, and EM is offered only.

What gives?

Perhaps there was an element of complacency in assuming that December would follow on smoothly into January, and that risky assets would continue to perform. When they didn't, and nascent YTD P/L's turned negative, a selloff ensued.

Regardless, there has already been a fair amount of rumour and innuendo today.

Macro Man has heard stories that:

*There's been another coup in Thailand
*The SNB will announce that it's unhappy with CHF weakness
*Korea will impose Thai-style controls on foreign portfolio flows

All a bunch of rubbish, naturally, but nevertheless a useful insight into how (surprisingly) fragile the market's psyche is. It is too early to conclusively state that the worm has turned and that risk aversion will descend upon us; however, another down day for the US stock market could well trigger such an outcome. Stay tuned.

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