Risk aversion rippled across markets - Westpac

Analysts at Westpac explained that risk aversion rippled across markets, with US Treasury yields tumbling and JPY outperforming. 

Key Quotes:

"At the panic lows the VIX “fear index” spiked to 35.7%, its highest levels since August 2015. At one point the DJIA fell almost -1600 points (-6.3%), the broader S&P 500 -4.5% at the lows.

The equity market slide triggered a sharp fall in US treasury yields, though not until late NY trade. The 10yr yield fell from above 2.85% to 2.71%, though this only takes the yield back to where it was last Wednesday. Pricing for Fed tightening in 2018 was trimmed, from around 66bp to 59bp, though March is still seen as >80% chance.

So Treasuries found safe haven demand but gold ticked only a little higher, up 0.5%, still below Friday morning levels. The Japanese yen rallied, USD/JPY slipping from 110.20 in the NY morning to lows around 109.00. The Swiss franc also rallied in early Sydney trade, EUR/CHF dropping from 1.1620/40 to 1.1525.

Otherwise the USD is broadly higher, EUR/USD -0.6%, GBP/USD-1%. AUD/USD ignored European equity weakness, wandering around 0.7940/50 into the NY session, but finally succumbed in the NY afternoon, falling to 0.7880, about -0.6% on the day. NZD/USD held up better, -0.3%, leaving AUD/NZD down 0.2% at 1.0840.

Data cannot be blamed for the US equity slide. The US non-manufacturing ISM survey jumped from 56.0 in Dec to 59.9 in Jan, well above consensus and a high since 2005."