Traders baffled by ‘bizarre’ global markets volatility over holiday period

Analysts say this time of year is usually marked by a lull, not increased movement

Traders have branded recent stock market moves across the globe as “bizarre”, after Wall Street staged a dramatic comeback following the worst Christmas Eve of trading on record.

On Monday the Dow Jones closed at its worst point since September 2017, the S&P 500 hit its lowest mark since April 2017 and the Nasdaq Composite closed at its worst point since July 2017.

By contrast, when markets reopened on Wednesday the Dow Jones recorded its largest ever single-day increase while the S&P 500 and Nasdaq both rose by 5 per cent.

Some suggested reasons for volatility include poor consumer confidence in the US and continued US-China trade war fears. Markets have also been rocked by general global political and economic uncertainty: Donald Trump is said to be preparing to fire Federal Reserve chair Jerome Powell, and the US government shutdown is set to continue into the new year.

However, analysts are stumped as to exactly why markets have moved so dramatically in recent days, with Stephen Innes, head of trading for Asia Pacific at Oanda Corp describing the situation as “completely bizarre”.

“It’s incredible just how harmful markets veer when sentiment slides,” he added.

Sean Fenton, portfolio manager at Tribeca Investment Partners, said the movement was “certainly unusual for this time of year”, and noted that normally in December “you see people take holidays and sort of shutting up shop, not surges in volatility”.

Wall Street’s recovery in the second half of this week has helped boost European and Asian markets, with the FTSE 100 rising 2.2 per cent on Friday.

Meanwhile, the oil market is showing similar volatility off the back of supply uncertainty.

US futures rose 2.6 per cent on Friday, having dropped 3.5 per cent on Thursday, and earlier in the week, the oil price plunged by 6.7 per cent on Christmas Eve, then recovered by almost 9 per cent in the next trading session.

Makiko Tsugata, a senior analyst at Mizuho Securities, said more volatility lay in store for the commodity.

“Oil markets, along with stock and bond markets, are expected to see higher volatility in 2019,” she said.

“Investors view production cuts pledged by Opec and non-Opec as not enough to balance global supply and demand.”

Additional reporting by newswires