More evidence that de-risking is the way to go. Tarullo reminds the market that the US recovery could be dealt a serious blow by the European meltdown. The market has been slowly coming to that conclusion but it has hit with full force only in the last 48 hours.
Massive liquidation of AUD and emerging markets positions since yesterday is evidence of that. The leveraged community is trying to squeeze out a narrow door all at once, which always leads to fireworks. We saw it 1997/98, 2008/2009 and again so far this week. It always leaves market carnage in its wake.
Markets are doing a bit of backing and filling after a deep purge, to put it politely, earlier this morning.