Extreme volatility has been the order of the week and even an encouraging recovery in U.S. stocks overnight hasn't been met with much conviction, which reflects how investor sentiment seems to have turned, last year we saw more willingness to buy on dips and it's a key change that the market seems to view rallies with suspicion so far this year. The question is whether that suspicion runs shallow or deep.

Stefan Worrall

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In U.S. dollar terms, Japan is significantly underperforming versus the U.S. and some of that may have to do with the fact that it's the end of a financial year and the end of a financial quarter that has been particularly harrowing, so much money in Japan is institutional and for that reason institutional frames of mind prevail, which can cause things to slow down at certain times of year.

Stefan Worrall
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There's a general sense of caution as we look ahead to tomorrow's CPI and as we approach the end of the month, which is actually the end of the financial year for most listed stocks, it would unquestionably be more desirable for policymakers in Japan to end the month on a higher note than we're seeing right now. Unless the yen weakens substantially between now and the end of March, I imagine the Nikkei will have a hard time holding its current position.

Stefan Worrall
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There's no question that the FOMC is expected to provide the much-needed clarity global markets need in order to move forward with some sense of conviction, ahead of that, we're seeing a very pregnant pause and an air pocket of conviction.

Stefan Worrall
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There's no question that the FOMC is expected to provide the much-needed clarity global markets need in order to move forward with some sense of conviction, ahead of that, we're seeing a very pregnant pause and an air pocket of conviction following yesterday's BOJ statement.

Stefan Worrall
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The ECB decision is seen as very positive now that markets have digested what it all means, but conviction perhaps isn't as strong as it should be as investors exercise a bit of caution, i don't think investors are expecting anything drastic from the BOJ, especially given the fact that they are meeting before the FOMC and will be reticent about making a big aggressive gamble ahead of a Fed meeting.

Stefan Worrall
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The yen volatility we've seen following Draghi's comments is going to temper any big-picture optimism that comes out of the ECB's moves.

Stefan Worrall
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Following the selloff and the fears of recession that emerged early in the new year, people pulled back aggressively from their previous expectations about how a rate hike from the Fed might unfold, suddenly some of this lost confidence has been restored as we've seen a lot of recent economic data from the U.S. beating expectations.

Stefan Worrall
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The IMF has suggested that members of the G-20 summit use the meeting as a means of discussing a coordinated policy response for what could otherwise be a crisis, i think investors are closely watching the G-20 for any signs of a coordinated fiscal response.

Stefan Worrall
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There's been a tempering of bullishness in the Nikkei, the risks are finely balanced at the moment and without catalysts or a clear direction we're seeing a real lack of conviction in the market.

Stefan Worrall
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There's no question that the U.S. has experienced a substantial rebound and that has set the tone for this morning's trading in terms of instilling confidence in the broader outlook, that the market has chosen to focus on U.S. strength rather than Japan's weak January trade data suggests that a lot of negativity had already been priced in, which isn't surprising considering the terrible sell-off we saw in the beginning of this year.

Stefan Worrall
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The rally itself has been extraordinary but very thin and the failure of the yen to continue on the fairly steady path of weakening we've seen in the past couple of days has been reflected as nervousness in the Nikkei, it's been a very volatile two weeks and nerves are still frayed despite the fact that we're off the bottom of those extreme sessions we saw last week.

Stefan Worrall
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Indications are that they are probably going to experience a bit of touch-up on the downside but it's unclear how much and how that might reflect in regional markets.

Stefan Worrall
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In the year so far the market has been characterized not only by sharp selling off but also by volatility and chaotic movements, today's market action is encouraging, as was Monday's, but it doesn't necessarily signal that this is the end of the selling or the beginning of the rebound.

Stefan Worrall
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The weakening of the Chinese RMB seems to have spooked the yen and by extension the Nikkei in an already nervous and shell-shocked market that's worried about dynamics both economic and geopolitical, in these last couple of days the yen has moved in a way that chartists have called a break from the weakening trend of Abenomics that we've seen for the past few years, and in that kind of environment the market becomes incredibly vulnerable to events like the RMB failing to stabilize.

Stefan Worrall
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The Middle East is now front and centre in terms of geopolitical... by Stefan Worrall

The Middle East is now front and centre in terms of geopolitical risk.

Stefan Worrall
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The movement has been a bit choppy and a little bit disconnected during these past few days, partly because of the recent holidays and partly because of end-of-month related activity we have had a fairly susbstantial recovery since the end of September, but the market is still in a state of anticipation ahead of the FOMC. We've been in rehearsal mode for a long time and it's created a huge amount of nervousness and volatility, but now it's showtime.

Stefan Worrall
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The Nikkei has been closely reflecting the yen's moves this week so the bit of strengthening we saw in the yen overnight seems to have brought the mood down slightly this morning, but we've also got a three-day weekend coming up in Japan and it's not unusual for that to dampen risk appetite after a long week full of activity.

Stefan Worrall
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Clearly that sharp sell-off that we've seen in overseas equities has been rationally reflected in Asian markets as well.

Stefan Worrall
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The market is digesting the weekend data from U.S. and China. Investors were finally reminded of the reality that the long-lasting era of quantitative easing is ending in a month.

Stefan Worrall
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If we get some certainty about the strength of the U.S. economy and the likelihood of policy normalization by the Fed, and if a rate hike seems justifiable, that is positive for sentiment ... because a lot of people have been bracing for this.

Stefan Worrall
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