Markets

Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

The week that never was. Dutch elections, a Federal Reserve rate hike, even a Chinese rate hike (though they tried to deny it)...it had it all. But whither the volatility?

It is almost as if it's holiday season and everyone's gone all quiet.

Bond Torpor
Fed finally meets market expectations, killing volatility in the U.S yield curve
Source: Bloomberg

Clearly a smaller-than-expected seat count for the Dutch version of Marine Le Pen was going to be a risk-back-on moment for European markets, but even that has petered out. 

Relief Shrug
Dutch shares bounced on the election result but a gain below 1% is hardly stellar
Intraday times are displayed in ET.

As her opponent Emmanuel Macron noodles just a few percentage points higher than the rest of the pack -- complacency thrives. 

Not a Care in the World
Higher highs in the S&P 500 have killed volatility -- there hasn't been a good rout since Candidate Trump
Source: CBOE, Bloomberg

For once even the Fed got its message absolutely spot on, and it is not often you can say that. By matching a rate hike with an unchanged dot plot (an amalgam of each FOMC voter's rate outlook) Janet Yellen has achieved Yoda status overnight. More to the point, the Fed's now bang in line with market expectations, yet another reason for volatility to be utterly absent from markets.

European Dream Avoids Nightmare
But there's not much of a response from the euro
Source: Bloomberg

The post-crisis consensus that the global central bank safety net can catch all has resulted in markets that are priced to perfection. This is not a clever place to be if something unexpected comes out of left field -- such as a Le Pen victory in May, which would raise genuine risks for Frexit and the euro.

But if this week's events have failed to move the needle, it's hard to see what will. Maybe what we need is a week with little important events scheduled, rather than waiting for the big splashes. Oh wait, that's next week.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Marcus Ashworth in London at mashworth4@bloomberg.net

To contact the editor responsible for this story:
Jennifer Ryan at jryan13@bloomberg.net