Majority of Americans support more nuclear power in the country

Energy

A majority of U.S. adults remain supportive of expanding nuclear power in the country, according to a Pew Research Center survey from May. Overall, 56% say they favor more nuclear power plants to generate electricity. This share is statistically unchanged from last year. Majority of Americans support more nuclear power in the country_1

Majority of Americans support more nuclear power in the country_1

But the future of large-scale nuclear power in America is uncertain. While Congress recently passed a bipartisan act intended to ease the nuclear energy industry’s financial and regulatory challenges, reactor shutdowns continue to gradually outpace new construction.

Americans remain more likely to favor expanding solar power (78%) and wind power (72%) than nuclear power. Yet while support for solar and wind power has declined by double digits since 2020 – largely driven by drops in Republican support – the share who favor nuclear power has grown by 13 percentage points over that span.

When asked about the federal government’s role in encouraging the production of nuclear energy, Americans are somewhat split. On balance, more say the government should encourage (41%) than discourage (22%) this. But 36% say the government should not exert influence either way, according to a March 2023 Center survey.

Views by gender

Attitudes on nuclear power production have long differed by gender.

In the May survey, men remain far more likely than women to favor more nuclear power plants to generate electricity in the United States (70% vs. 44%). This pattern holds true among adults in both political parties.

Views on nuclear energy differ by gender globally, too, according to a Center survey conducted from fall 2019 to spring 2020. In 18 of the 20 places surveyed around the world (including the U.S.), men were more likely than women to favor using more nuclear power as a source of domestic energy.

Views by party

Republicans are more likely than Democrats to favor expanding nuclear power to generate electricity in the U.S. Two-thirds of Republicans and Republican-leaning independents say they support this, compared with about half of Democrats and Democratic leaners. Majority of Americans support more nuclear power in the country_2

Majority of Americans support more nuclear power in the country_2

Republicans have supported nuclear power in greater shares than Democrats each time this question has been asked since 2016.

The partisan gap in support for nuclear power (18 points) is smaller than those for other types of energy, including fossil fuel sources such as coal mining (48 points) and offshore oil and gas drilling (47 points).

Still, Americans in both parties now see nuclear power more positively than they did earlier this decade. While Democrats remain divided on the topic (49% support, 49% oppose), the share who favor expanding the energy source is up 12 points since 2020. Republican support has grown by 14 points over this period.

While younger Republicans generally tend to be more supportive of increasing domestic renewable energy sources than their older peers, the pattern reverses when it comes to nuclear energy. For example, Republicans under 30 are much more likely than those ages 65 and older to favor more solar panel farms in the U.S. (80% vs. 54%); there’s a similar gap over expanding wind power. But when it comes to expanding nuclear power, Republicans under 30 are 11 points less likely than the oldest Republicans to express support (61% vs. 72%).

A look at U.S. nuclear power reactors

The U.S. currently has 94 nuclear power reactors, including one that just began operating in Georgia this spring. Reactors collectively generated 18.6% of all U.S. electricity in 2023, according to the U.S. Energy Information Administration. Majority of Americans support more nuclear power in the country_3

Majority of Americans support more nuclear power in the country_3

About half of the United States’ nuclear power reactors (48) are in the South, while nearly a quarter (22) are in the Midwest. There are 18 reactors in the Northeast and six in the West, according to data from the International Atomic Energy Agency (IAEA).

The number of U.S. reactors has steadily fallen since peaking at 111 in 1990. Nine Mile Point-1, located in Scriba, New York, is the oldest U.S. nuclear power reactor still in operation. It first connected to the power grid in November 1969. Most of the 94 current reactors began operations in the 1970s (41) or 1980s (44), according to IAEA data. (The IAEA classifies reactors as “operational” from their first electrical grid connection to their date of permanent shutdown.)

Within the last decade, just three new reactors joined the power fleet. Three times as many shut down over the same timespan.

One of the many reasons nuclear power projects have dwindled in recent decades may be the perceived dangers following nuclear accidents in the U.S. and abroad. For example, the 2011 Fukushima Daiichi accident led the Japanese government to greatly decrease its reliance on nuclear power and prompted other countries to rethink their nuclear energy plans. High construction costs and radioactive waste storage issues are also oft-cited hurdles to nuclear energy advancement.

Still, many advocates say that nuclear power is key to reducing emissions from electricity generation. There’s been a recent flurry of interest in reviving decommissioned nuclear power sites, including the infamous Three Mile Island plant and the Palisades plant, the latter of which shuttered in 2022. Last year, California announced it would delay the retirement of its one remaining nuclear power plant until 2030. And just this summer, construction began on a new plant in Wyoming. It’s set to house an advanced sodium-cooled fast reactor, pending approval from the Nuclear Regulatory Commission.

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Owen Li

Economic

Central Bank

US central bank policymakers pushed back on Monday against the notion that weaker-than-expected July jobs data means the economy is in recessionary freefall, but also warned that the Federal Reserve will need to cut rates to avoid such an outcome.

Many of the latest job report's details leave "a little more room for confidence that we're slowing but not falling off a cliff," San Francisco Fed president Mary Daly said at an event in Hawaii.

"Our minds are quite open to adjusting the policy rate in coming meetings," she said. When and by how much will depend on incoming economic data, of which there is a lot before the Fed's next meeting in mid-September, she said, adding, "it's extremely important that we not let (the job market) slow so much that it tips itself into a downturn."

US stocks fell steeply on Monday amid fears the US central bank has waited too long to begin cutting interest rates. Interest-rate futures contracts at the day's end reflected overwhelming bets that the Fed will start cutting borrowing costs next month with a bigger-than-usual 50-basis-point reduction to its policy rate.

Speaking earlier on Monday, Chicago Federal Reserve president Austan Goolsbee cautioned against taking too much of a signal from the global market sell-off, noting it stemmed in part from the Bank of Japan's decision last week to raise rates, as well as increasing geopolitical tensions in the Middle East.

"The law doesn't say anything about the stock market; it's about the employment and it's about price stability," Goolsbee said in an interview with CNBC, referring to the Fed's dual goals set by Congress, as he noted how prone financial markets were to volatility.

Nonetheless, Fed policymakers need to be aware of the possibility that markets are signaling a change in the economy's direction, he said.

"If the market moves give us an indication over a long arc that we're looking at a deceleration of growth, then we should react to that," Goolsbee said. "As you see jobs numbers come in weaker than expected but not looking yet like recession, I do think you want to be forward-looking at where the economy is headed for (in) making the decisions."

Fresh data on Monday showed that the vast US services sector rebounded from a four-year low last month, with a measure of services employment rising for the first time since January.

The US services data "aligns with our view of an economy in transition rather than one on the brink of collapse," said Matthew Martin, a US economist at Oxford Economics. "Expectations for aggressive rate cuts in September are overdone."

Inter-meeting cut

The Fed kept its benchmark interest rate unchanged in the current 5.25%-5.50% range last week and signaled it was on course to begin cutting rates in September, but that decision was followed by worrying signs the labor market might already have turned.

The number of Americans filing new applications for unemployment benefits increased to an 11-month high while job gains markedly slowed in July and the unemployment rate rose to 4.3%.

The data cast doubt on Fed chair Jerome Powell's assertion directly after the latest policy meeting that the labour market appeared to be normalising gradually, which would allow the central bank to take a bit more time before cutting rates to ensure inflation was fully quelled.

Instead, economists and traders honed in on Powell's other comments that the Fed would respond if there was an unexpected deterioration in the labour market.

Asked about the possibility of an inter-meeting rate cut, Goolsbee said "everything is always on the table" from rate increases to cuts as the Fed maintains its focus on employment, inflation and financial stability.

"If the conditions collectively start coming in on the through line that there's deterioration on any of those parts, we're going to fix it," Goolsbee said.

Inter-meeting cuts are typically reserved for emergencies, however, and so far neither Goolsbee nor Daly signalled that's what they are seeing.

Last week marked a shift in the Fed's communications to focus on its full employment mandate as much as its price stability mandate, Daly said, and that shift has sparked a downward move in market-determined borrowing costs like mortgage rates.

"The communication itself is a policy adjustment," she said.

Source: Reuters

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Kevin Du

Energy

Investors abandoned many of their remaining bullish petroleum positions last week amid growing concerns about lacklustre consumption and a worsening outlook for the global economy.

Hedge funds and other money managers sold the equivalent of 117 million barrels in the six most important futures and options contracts over the seven days ending on July 30.

Fund managers had sold petroleum in each of the most recent four weeks, cutting their net position by a total of 262 million barrels since the start of July.

The most recent week saw sales in Brent (-68 million barrels), NYMEX and ICE WTI (-31 million), U.S. gasoline (-9 million) and European gas oil (-9 million) though essentially no change in U.S. diesel.

The combined position had been halved to just 262 million barrels (4th percentile for all weeks since 2013) from 524 million barrels (40th percentile) on July 2.

Fund positions had become very bearish across Brent (3rd percentile), U.S. gasoline (5th percentile), U.S. diesel (14th percentile) and European gas oil (16th percentile).

There was slightly less bearishness towards WTI (28th percentile), based on low stocks around the NYMEX delivery point at Cushing and potential for a squeeze.

Bearishness across the complex rather than isolated contracts indicates traders are anticipating weaker global consumption as the major economies lose momentum.

Recent manufacturing surveys from the United States, the eurozone and China have all shown activity stalling in the second and third quarters after a brief rebound at the start of the year.

The expected depletion of global petroleum inventories has been pushed back multiple times this year; now it looks like it has been deferred again.

As a result, front-month Brent futures contracts have slumped below $76 per barrel, the lowest since the turn of the year, and below the long-run inflation adjusted average.

U.S. Natural Gas

Investors made few changes to their basically neutral view on the outlook for gas prices in the United States as inventories remained well above average despite ultra-low prices and record gas-fired power generation.

Hedge funds and other money managers purchased the equivalent of 30 billion cubic feet (bcf) of futures and options linked to the price of gas at Henry Hub in Louisiana over the seven days ending on July 30.

Fund managers have purchased a total of 182 bcf in the two most recent weeks after selling a total of 980 bcf over the four previous weeks.

The combined net long position of 371 bcf was in the 42nd percentile for all weeks since 2010, broadly neutral or slightly bearish.

Working gas inventories were still 462 bcf (+17% or +1.36 standard deviations) above the prior 10-year seasonal average on July 26.

The U.S. storage injection season has passed the half-way point so it is virtually certain inventories will start winter 2024/25 above average.

Ultra-low gas prices have driven record gas consumption by power generators but that has been offset by the continued strength in production and repeated disruption of LNG exports.

After rallying during May and June, inflation-adjusted gas futures prices have retreated back towards the multi-decade lows set between February and April.

From a price and positioning perspective, the balance of risks is strongly weighted to the upside, which has encouraged many fund managers to maintain bullish long positions.

But the same has been true for more than a year, and the anticipated depletion of stocks and surge in prices has been repeatedly delayed, which has enforced a cautious approach.

Source: Reuters

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NIESR

Political

Economic

The new government has made much out of the poor economic inheritance it has received. What do you think are the key issues they face?

The new government has inherited a UK economy with slow economic growth and stagnant living standards. Given the current economic conditions, we forecast GDP to grow by just over 1 per cent annually over the next few years.

One of the main factors driving this stagnation is the low growth in productivity in the UK compared to peer countries. More importantly, there are large persistent regional disparities across the country, especially between productivity levels in London and other regions.

Low productivity is partially driven by low levels of investment. Notably, business investment as a share of GDP has been persistently lower than comparable OECD economies. And although taxes are at historical highs, public services and infrastructure are much in need of more public investment.

The country’s transition to net zero by 2050 will also require substantial investments. In this context, the government’s plan to establish Great British Energy, a publicly owned company aimed at increasing investments in clean energy projects, is a step in the right direction.

However, more generally, public investment faces constraints due to the current fiscal rules. There is therefore a pressing need for the new government to review how fiscal policy is done in the UK in order to promote increased investments in high-productivity activities, which would help increase long-term economic prospects and elevate living standards.

Given the constraints the current fiscal rules impose on public investment, could you talk me through what a new fiscal framework might look like?

The fiscal rules established towards the end of the previous parliament require public debt-to-GDP ratio to be falling within a five-year horizon, and the deficit-to-GDP ratio to fall below three per cent by the end of the same period.

Fiscal rules generally serve as a tool to maintain fiscal sustainability and prevent elevated levels of debt. However, the current design of the rules acts as a disincentive towards investing in public projects that achieve long-term returns over a period exceeding five years, since those would increase debt in the medium-term.

As I mentioned earlier, there is a pressing need to inject more investment in public services and infrastructure. Prioritizing long-term projects with large fiscal multipliers is not only good for growth, but also for public finances. Higher productivity and growth would increase the tax base in the long run.

In that regard, the government could implement some of the following revisions to the current fiscal framework.

Firstly, the government could consider exempting public investment from the current fiscal measures. This would allow more room for increased public investments which are urgently needed, especially in infrastructure, health, education, and the green transition.

In addition, we believe that establishing a fixed schedule for fiscal events could provide more predictability and enhance business confidence. The government’s proposal of one annual fiscal event partially adopts this proposition.

Lastly, the government could include public sector net worth as a target within the fiscal framework. This would mean looking at the overall balance sheet of the government in terms of assets and liabilities, rather than just focusing on yearly budgets. Including net worth as a target would serve as an incentive towards increased sustainable investments, promoting the country’s long-run economic prospects.

In terms of output, employment and inflation, it could be argued that the government has inherited a really healthy economy. Could you talk me through how you see current economic conditions in the UK?

The country experienced slow economic growth in 2023, with GDP growing by just 0.1 per cent as a result of low consumer demand and slow investment growth. However, it has since shown signs of recovery with growth recording 0.9 per cent in the three months to May 2024. Nonetheless, trend economic growth remains low by historical and international standards.

Despite recent economic recovery, the unemployment rate has risen to 4.4 per cent in May, its highest level in almost three years, indicating that the labour market is cooling. However, the labour market still remains tight by historical standards. This is also evident by the vacancies-to-unemployment ratio which, despite falling, remains higher than its historical average.

And while elevated levels of wage growth have allowed households to make real income gains, it has created some upward pressure on inflation. As reported in our last Wage Tracker, the annual growth rate of average weekly earnings, including bonuses, was 5.7 per cent in the three months to May 2024, which suggests that the rise in minimum wage in April is still impacting wage growth.

Nevertheless, it is good news that headline inflation has fallen to the Bank of England’s target of 2 per cent in May and remained at that level in June. These recent falls were driven by energy and food price hikes from last year dropping out of annual inflation. However, to maintain inflation at target levels, core and services inflation need to come down. They currently stand at 3.5 per cent and 5.7 per cent, respectively.

Finally, how do you see the economy evolving over the next year or two?

Given our analysis of current economic conditions, we forecast GDP to grow by 1.1 per cent in 2024 and 1.2-1.3 per cent annually in the medium-term. There are some downside risks to these estimates, mainly due to geopolitical risks. On the other hand, the change in government might serve as an upside risk if it potentially results in a ‘feel good factor’. Growth could also be higher if the new government decides to spend more than we currently expect.

As the labour market continues to cool, we forecast that unemployment will moderately rise in the medium term, reaching a peak of 4.8 per cent in the second quarter of 2025, while remaining below its natural rate (which we estimate to be around 5.0 per cent). Conversely, we forecast wage growth to slow gradually throughout the year, and to drop in early 2025 in line with inflation.

However, with the persistence in service-sector inflation and sticky underlying inflation, we forecast that headline inflation will gently rise again in the second half of 2024 and reach a peak of around 3 per cent in 2025, before going down to near-target levels by end of 2027.

In our upcoming UK Economic Outlook, we explore the challenges facing the new government and discuss this outlook in more detail.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Economic

Stocks

Cryptocurrency

Wall Street finished sharply lower on Monday, closing out a global market rout that saw Japan's main stock index suffer its worst day in 37 years.

Wall Street's benchmark S&P 500 dropped 3 per cent, its sharpest one-day drop since September 2022, while the tech-dominated Nasdaq Composite fell 3.4 per cent.

The sell-off was broad-based, with more than 95 per cent of stocks in the S&P 500 falling, but large tech companies that had driven much of this year's earlier market rally were among the worst hit. Shares in Nvidia fell as much as 15 per cent in early trading, before closing down 6 per cent.

The market has suddenly moved "from a warm summer's day straight into autumn", said Antonio Cavarero, head of investments at Generali Asset Management.

Still, conditions by the end of Monday were better than they had been earlier in the day. The Vix index of expected US stock market turbulence, commonly known as Wall Street's "fear gauge", was at 38 by Monday evening. That is well above its recent levels and its long-term average of around 20, but far below the four-year high of 65 it hit earlier on Monday.

Likewise, the S&P and Nasdaq both recovered some of their morning losses.

Markets, which have been rising for most of this year, fell amid fears the Federal Reserve has been too slow to respond to signs the US economy was weakening, and might be forced to play catch-up with a series of rapid interest rate cuts.

Markets are now expecting 1.17 percentage points of cuts over the Fed's final three meetings of the year, suggesting one or two jumbo half-point interest rate cuts and one quarter point cut. Early speculation about an emergency cut before the Fed's September meeting was mostly erased by end of day.

"This is a market tantrum," said Priya Misra, a portfolio manager at JPMorgan. "I think the market will continue to panic until the Fed shows signs of moving." US Stocks Finish Sharply Lower to Close Out Global Market Rout_1

US Stocks Finish Sharply Lower to Close Out Global Market Rout_1

The global sell-off was exacerbated by the unwinding of the so-called yen carry trade, in which traders had taken advantage of Japan's low interest rates to borrow in yen and buy risky assets.

Tokyo's Topix fell 12.2 per cent, the sharpest sell-off since "Black Monday" in October 1987 and more than erasing its gains for the year.

The yen has strengthened by about 12 per cent since mid-July, helped by last week's interest rate rise from the Bank of Japan, including a gain of 1.9 per cent to ¥144.11 against the dollar on Monday.

"The pockets of pain are in those trades that were based on cheap funding in the Japanese yen space and anything in tech," said Cavarero. "This looks like a healthy, long-overdue market correction," he added.

The Fed kept rates on hold when it met last week, but weaker than expected US jobs data on Friday led some investors to conclude that the central bank erred in not cutting rates.

"I think interest rates are too high," said Rick Rieder, chief investment officer of global fixed income at BlackRock. While the economy was still "relatively strong", the Fed needed to get rates to about 4 per cent "sooner rather than later", Rieder said.

However, others said a rapid fall in rates was unrealistic and an emergency move could be counterproductive and create panic.

"I think the market has gotten completely ahead of itself in terms of interest rate cuts being priced in at this point," said John McClain, portfolio manager at Brandywine Global. An intra-meeting cut is "like shouting fire in a crowded theatre", he said.

US Stocks Finish Sharply Lower to Close Out Global Market Rout_2

Adding to the pressure on markets, on Saturday Warren Buffett's Berkshire Hathaway disclosed that it had halved its position in Apple in the second quarter, while raising its cash position to a record $277bn and buying Treasuries.

Retail investors were also unnerved on Monday by problems accessing their brokerage accounts at companies such as Fidelity and Charles Schwab.

Republicans including Donald Trump seized on the market moves to attack the Biden administration and Kamala Harris, the Democratic presidential nominee.

"Voters have a choice — Trump prosperity or the Kamala Crash and Great Depression of 2024," the former president wrote on Truth Social, his social media platform, in capital letters on Monday morning.

However, Wall Street later pared some of its heavier losses after US ISM services sector data came in slightly above expectations. "Today was a reminder, with ISM, that this is not an economy that is collapsing," said Daniel Ivascyn, chief investment officer at Pimco.

Traders in Tokyo said Monday's plunge was sparked by an exodus of global investors from the Japanese market, which had notched up sizeable gains earlier in the year.

"Japan seems to be the epicentre of a lot of movement today," said Jason Liu, head of Apac equity and derivative strategy at BNP Paribas. "There appears to be a genuine broad-based Japan liquidation by global funds."

Trading in both Topix and Nikkei futures were suspended during the afternoon session as the selling frenzy continued into the close, hitting "circuit breaker" levels that automatically stop trading. In South Korea, similar circuit breakers were triggered for the first time in four years.

South Korea's Kospi benchmark fell 8.8 per cent while the Australian S&P/ASX dropped 2.5 per cent. India's Sensex lost 2.7 per cent.

In Europe, the benchmark Stoxx Europe 600 shed 2.2 per cent. The UK's FTSE 100 fell 2 per cent.

The global turbulence extended to the cryptocurrency market, with the price of bitcoin falling 14 per cent at one point to $53,789, while the price of ether, another cryptocurrency, fell as much as 21 per cent to $2,390. By mid-afternoon bitcoin was down 8 per cent and ether was down 11 per cent.

Source: FT

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Cohen

Economic

Stocks

Bond

Commodity

Global markets began the week with a sharp fall, with volatility indicators soaring while stocks tumbled, although declines were less severe than in other stock market crashes.

These falls are not linked to a single factor, although lackluster US employment numbers for July were certainly a catalyst. The rise in Japanese rates last Wednesday also made the yen more expensive, limiting the interest in carry operations financed with the currency.

Among the notable declines, the Nikkei tumbled more than 12% on Monday, its biggest drop since "Black Monday" in October 1987. Red Monday but Not Black for World Stock Markets_1

Red Monday but Not Black for World Stock Markets_1

Volatility

The VIX index, which measures the nervousness of the markets, could register its largest increase in a session on Monday, the index jumping by more than 170% since Friday.

The index has never gained so much in one session, with the previous record of a 115% rise, set in February 2018, having been triggered by a rise in bond yields and fears of rising inflation. Red Monday but Not Black for World Stock Markets_2

Red Monday but Not Black for World Stock Markets_2

US Equities

The S&P 500 and the Nasdaq opened down 4% and 6%, before limiting part of the losses during the session. The S&P 500 has already lost 9% from its record set on July 16, compared to a 14% decline for the Nasdaq from its July 11 high.

However, during "Black Monday", the two indices had lost 20% and 11.5% respectively, while losses during the Covid crisis could reach 12% for the S&P 500 like the Nasdaq. Red Monday but Not Black for World Stock Markets_3

Red Monday but Not Black for World Stock Markets_3

The Heart Of The Problem

The yen rebounded significantly over a week, by more than 7%, supported by the Japanese authorities and the rise in rates from the Bank of Japan.

However, negative rates in Japan made it possible to finance carry operations, with investors borrowing funds in yen which they invested in other assets. The rebound of the currency forces them to close these positions, and therefore to sell the assets purchased with the weak yen.

These operations represent several trillion dollars, which explains the extent of the decline in the markets.

The Swiss franc, another currency for financing carry strategies, also gained 4.2% over one week, although this movement is not of abnormal magnitude. Red Monday but Not Black for World Stock Markets_4

Red Monday but Not Black for World Stock Markets_4

Gold or silver?

Gold is under pressure, despite its role as a safe haven asset. The metal has gained 16.5% for the year, and lower US rates should support the commodity's price, but significant volatility has taken gold along with everything else.

In 2020, gold lost more than 3% on multiple occasions and fell more than 7% in October 2008 following the collapse of Lehman Brothers.

Silver, whose price frequently moves in step with that of gold, lost 5% on Monday, a relatively modest decline: the metal lost almost 16% in an October 2028 session.

Source: Reuters

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Alex

Economic

Stocks

Asian markets open on Tuesday still reeling from a wild session on Monday that saw Japan's second-biggest stock crash ever spill over into world markets, helping to unleash a wave of volatility usually associated with major crises.

The curious thing is though, there's no smoking gun that explains the scale of the selloff, either in Japan or globally. At least not a singular or obvious one.

Yes, the yen carry and other leveraged trades were probably overcooked, the Bank of Japan was maybe too hawkish and is now headed for a policy error, ditto the Fed by not cutting rates last week, and the AI-inflated Big Tech bubble on Wall Street was well overdue a reversal.

But is that enough to warrant a 12% plunge in Japanese stocks - a fall only exceeded by the 15% slump on Oct. 20, 1987 after Black Monday - or the surge to 65.0 on the U.S. VIX volatility index, a level only ever topped in the market meltdowns of 2008 and 2020?

Taking Stock of Japan's Historic Market Crash_1

But there's a case to make that it's excessive. On the economic side, there's no obvious sign of collapse - Japanese and U.S. services purchasing manager index numbers on Monday showed pretty solid growth.

Indeed, the U.S. services PMI data was enough to push short-dated Treasury yields higher on Monday, halting the recent decline that had also reached historical magnitudes.

This is the febrile atmosphere traders in Asia on Tuesday will received the Reserve Bank of Australia's latest policy decision, inflation figures from Taiwan and the Philippines, and more corporate results from Japan.

The RBA is widely expected to hold rates at 4.35% but could the current turmoil force a cut? Traders are putting a one-in-10 probability on it.

It remains to be seen whether the current volatility proves to be a market-centric episode wiping out leveraged trades across a range of assets without spilling over into the "real" economy, or something more serious.

Taking Stock of Japan's Historic Market Crash_2

There have already been calls in some quarters for an emergency, inter-meeting Fed rate cut and earlier on Monday U.S. rates markets had begun to price in the possibility of just that or a 75 basis point cut next month.

But unless there is a clear deterioration in the economic data or deeper market dislocation, this is unlikely. By the U.S. close on Monday that pricing had eased and the VIX index had halved from its peak.

Classic "safe haven" assets gold and two-year Treasuries ended lower, although the yen hit a seven-month high. It has rallied around 13% in three weeks, virtually wiping out its year-to-date losses.

Further signs of yen stress and dislocation may come from the cross-currency basis market, a gauge of funding costs and demand for dollars. Traders will be watching.

Here are key developments that could provide more direction to markets on Tuesday: