What Traders Are Saying: Uncertainty Stalks London
Traders in the City of London, one of the financial districts of the UK capital, see a market environment where trust has all but evaporated and the best course of action is often, in the words of many spoken to by CNBC.com, to do absolutely nothing at all.
After three days of relatively slow trade more typical of August, markets plunged on Thursday and again Friday, with European shares suffering their biggest drop in nearly three years, as market volatility across the globe continued to threaten widespread panic.
A trader who identified himself only as Graham said between sips of beer in a Canary Wharf pub that the prevailing attitude in his workplace is this:
“The best bet right now is to do nothing. Every time you put risk on, you lose money. Every time you take risk off you lose money. You’re better off going away on a nice long holiday and hoping the fuss has died down by the time you come back. You’re also serving your clients better by doing nothing—although they won’t see it like that, and neither will the bank, and it’s not exactly what you get out of bed and go to work for.”
Those sentiments were echoed by other traders who shared their feelings with CNBC.com, including one who suggested he might not re-enter the market this year at all.
“I am biding my time," he said. "I won’t re-enter the market before January or February—maybe March. I don’t have the heart for it, with markets rising and falling 500 basis points at a time. I am superstitious, and after a loss, I need a gain to be double the size of that loss, to maintain mental equilibrium.
“I don’t think there’s any more bad news coming—like the S&P downgrade for example—but I think the bad news we have already had needs time to crystalize. I think things will start to settle down in September or October ... At the moment, I’m sitting with my hands under my thighs [to prevent himself from making trades].
“July and August are always quiet months, with European countries like Italy on holiday for a whole month," he said. "I think markets would be going down anyway, but the lack of liquidity available is exaggerating the downward impact of bad news.”
“The second half of the year is going to be awful. I’m actually very positive in general, and never really thought about confidence, but I don’t want to go out and buy anything, because I’m worried about my job,” Siamek, a trader at a large investment bank, explained.
“The way you act is based on how clear the future is to you," he continued. "At the moment, there are too many uncertainties that you don’t really have the confidence to do anything about it.
“The fear factor is definitely there. There’s the S&P downgrade and then there’s China to worry about and what happens if the Chinese economy slows down because that hurts global demand and a slowdown in global demand hurts Germany so that’s something to worry about as well,” he added.
"It’s a nightmare out there at the moment"
What also concerned Siamek was the lack of political leadership on issues that were clearly creating much of the volatility. He argued that markets knew Germany could never let the euro fail as a currency, as its own economy’s future was directly tied to the fate of the euro.
“Germany needs the single currency in order to export, so it will do anything to save the euro. Simple as that. Germany will do whatever it takes to save the euro,” he said.