As investors continue to follow the coronavirus pandemic track while awaiting news on a possible vaccine, the spotlight shines on central banks as they explore policy options amidst one of the most uncertain outlooks in decades.

This week’s main highlight will come from the European Central Bank’s (ECB) latest monetary policy decision and President Christine Lagarde’s subsequent press conference, which is taking place on Thursday.

Since the ECB’s last meeting in July, consumer prices in the 19-nation euro area fell for the first time in four years, highlighting that a recent rebound in economic activity has not managed to offset the pandemic’s profound impact on demand. This has triggered a chorus of Council Member concerns that the stronger EURO is amplifying deflationary pressures and signalling to the markets that Lagarde may try to talk down the EURO?

US markets down but recovered from session lows

US equities fell further last Friday albeit after recovering from steeper losses earlier in the session, once again concentrated in tech stocks.

Stocks have had a nervy start to trading Monday after the massive two-day slide for global equities since June left investors on edge. Currencies began the week with little fanfare, while crude oil declined.

US stocks ended lower despite a late-day rally, sending the market to its worst weekly loss since June, and technology to its most significant weekly decline since March. The S&P 500 Index closed at its lowest in two weeks on Friday ahead of the three-day US Labor Day holiday weekend.

In the short-term, more so with US markets closed today, it should remain an extremely choppy affair, with bounces likely being sold by design. That said, it will be interesting to see whether value can hold up on a relative basis, with the nature of any further tech sell-off, albeit orderly vs. disorderly likely deciding the playing field today.

The market will not like the virus headlines nor the vaccine news. Equities especially are not going to enjoy the latest vaccine news, as Moderna says it is slowing the newest trial to ensure diversity.

As we suggested on Friday, it would appear this is an equity-specific move and within that, one or two suspects. Or even a single-name shift that led to a global procession of stock indices micro tops that started to chime lower reverberating through the S&P 500, CSI300, and DAX.

Much of the sell-off is concentrated in tech names, which, as well as rising a lot in recent weeks, have been popular among retail investors on platforms like Robinhood.

A lot of that investment occurs via short-dated calls, which creates enormous gamma exposure for the dealers, which, as volatility picks up, creates a significant level of market angst, and usually something gives. So, with the stocks at the top and VIX not, it made more sense to reduce tech exposure.

Take the bears with a grain of salt

You can pick up any weekend story that sees the analysts in force talking about what the trading desk told them on Sept 2. But take the bears with a grain of salt.

Indeed, this shift lower is not that big of a surprise, and outside of oil, which has its idiosyncratic problems, cross-asset barely blinked.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp