Global stocks descended deeper into the abyss on Tuesday following the sharp selloff in oil prices which weighed heavily on risk sentiment. Asian shares commenced Wednesday on a shaky footing with most stocks stumbling to six-week lows as anxiety heightened over the diminishing impacts of major central banks attempting to revive economic growth. European markets were punished by the vacillating expectations over the Fed taking action in 2016 while Wall Street charged into bear territory as the persistent uncertainty repelled investors from riskier assets.

It is becoming increasingly clear that stock markets have been buoyed by optimism over central banks intervening to quell the financial turmoil while speculative rises in oil prices provided a temporary boost to risk sentiment. With concerns still lingering over the health of the global economy and uncertainty accumulating as the presidential election looms, the ingredients for a bear trend are present. With central bank caution leaving investors on edge, it could take an unexpected catalyst to spark a heavy stock market selloff.

Sterling bears unchained

Sterling was exposed to sharp losses on Tuesday following August’s static inflation figure of 0.6% which sparked discussions of Brexit having a grip on the UK economy. It seems that Sterling has become increasingly sensitive to domestic data with more explosive movements expected as investors ponder the impacts of Brexit. Although the string of positive data in recent weeks provided somewhat of a lifeline to Sterling bulls, the lingering Brexit anxieties continue to cap upside gains. Attention may be directed towards Wednesday’s UK employment data which could offer further clarity on how employment fared post-Brexit. If the employment data fails to meet expectations, the pound could be exposed to deeper losses as speculations mount over the BoE potentially implementing further stimulus measures in the future.

Commodity spotlight – WTI Oil

WTI Crude pierced below $45 on Tuesday following the gloomy predictions of future demand growth by the International Energy Agency (IEA) which sparked fears over the oversupply woes persisting. With Saudi Arabia and Iran increasing oil production right ahead of the informal OPEC meeting, bears may have been provided another foundation to install heavy rounds of selling. Optimism towards OPEC’s informal meeting in September concluding with an effective deal has noticeably deteriorated with further losses in oil expected if investors are actually left empty handed. Attention may be directed towards Wednesday’s Crude Oil inventories report which could leave WTI exposed to further declines if crude inventories rise.