Japan's Stock Market Just Had Its Worst Day In Five Months

While the Asian markets were open, the Bank of Japan reiterated its easy monetary policy framework, as expected. However, it cut its outlook for exports and industrial output.

But we can't ignore the likely effects of geopolitical turmoil on the markets.

The Japanese yen, which is widely considered to be a safe-haven asset class, climbed 0.3% against the dollar and 0.1% against the euro. A stronger yen makes Japanese goods less competitive in the global marketplace; in other words Japan's export goods are becoming more expensive.

"Risk aversion rules," said Societe Generale's Kit Juckes. "The Ukraine conflict shows no sign of being resolved (rather, there's far too high a chance of escalation for comfort). Overnight, the US has approved limited airstrikes in Northern Iraq. The conflict on Gaza too, is in danger of re-escalation. Investors have plenty of reasons to take risk off the table and are doing so across the board. Today, with a very thin economic calendar, at any rate, that is likely simply to continue."

Juckes warns that the light economic calendar allows traders and investors to focus their attentions to geopolitics, which could make for an ugly day in the markets.

"Even investors who want to buy into this weakness only really want to do so in September at the earliest, so the pool of dip-buyers to absorb any selling is tiny," he said. "It's a cop-out recommendation, but go with the flow. Today's winners are Bunds, Treasuries, the dollar and the yen."