By that I mean a rush into the relative safety of US Treasuries out of equities. The result is a drop in interest rates as investors seek return OF capital and not necessarily return ON capital.
In the process, the Japanese Yen has tended to be the recipient of inflows. I am still unclear as to why anyone would regard the Yen as a safe haven currency but I suspect it might have more to do with Yen carry trades being unwound which puts upward pressure on the funding currency as those trades are reversed.
The other thing which typically has happened is we get a spike higher in the Volatility Index or VIX. Here is a chart of what I prefer to call the Complacency Index. For those of you who might be newer to the markets, this index measures investor sentiment in general (derived from option premiums). When it is rising, it indicates investor unease/discomfort/concern with current events. When it is soaring it indicates downright fear/panic. When it is falling or flatlining it reflects complacency/ease/lack of concern/confidence.
To provide you with a better longer term perspective - I am also adding this weekly chart. Note that the current spike upward does not seem to be much when viewed in this light does it?
I am also noticing that commodities in general ( there are some exceptions ) are weak today especially as the US Dollar has actually worked up off its session lows and moved into positive territory. Yesterday the Euro was seen as a safer place to park money than the US Dollar - that has completely reversed today. ECB President Draghi's comments are certainly not helping the Euro especially when he stated that while the economy is recovering, risks on the downside remain and unemployment remains very high. Not exactly a full-throated endorsement of confidence is it?
Copper, another key benchmark, is also lower today. This late session recovery in the US Dollar and further downward movement in equities is actually bringing deflation fears back to traders' minds and as those fears strengthen ( at least for this immediate moment) gold is fading lower along with silver and copper and the other metals.
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