After ‘turnaround Tuesday’ brought rallies of 1% or more on most major stock indices, Wednesday morning has brought things back down to earth.

Overnight the Chinese stock market lost 3.2%, bringing it very close to a 20% loss since its peak at the start of the month.

With 20% losses being seen as an official ‘bear market’, investors are hoping that the decline won’t be the undoing of the spectacular rally seen since July.

The FTSE, CAC and DAX all opened up around 0.8% down, wiping out all or most of the gains made in response to Monday’s sell off.

Today’s main announcements are the release of the meeting minutes from the last MPC meeting at 08.30 BST and Canadian Core CP at 11.00.

Traders Retreat to Dollar and Yen

Predictably, the falls in equity markets have led to a flight back to the perceived safety of the Dollar and Yen.

Yesterday the Pound was strong after UK inflation showed some resilience, but this morning Sterling is falling faster than the Euro against both the Dollar and Yen.

At least the GBP/JPY is managing to hold above Monday’s lows, which is more than can be said for the EUR/JPY.

The commodity currencies, namely the Australian and Canadian Dollars, are also under pressure despite a big recovery in oil prices yesterday.

The GBP/JPY is still yet to revisit its Monday lows, but if this reversal of confidence gathers pace the Pound could have further pain to come.

A Fixed Odds One Touch trade predicting that the GBP/JPY will hit ¥155.50 in the next day could return 146%.

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