The logo of Binance is seen on their exhibition stand at the Delta Summit, Malta's official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian's
The logo of Binance is seen on their exhibition stand at the Delta Summit, Malta's official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian's, Malta October 4, 2018. Reuters

A look at the day ahead in Asian markets from Jamie McGeever.

There's a meltdown in the Wild West of crypto, equity markets lose their recently-found Mojo, volatility spikes higher and investors flock to U.S. Treasuries for safety and security.

Did financial markets return to some semblance of normality on Tuesday?

That's pretty much how world markets unfolded in the United States hours in response to the surprise news that crypto giant Binance signed a nonbinding agreement to buy rival FTX's non-U.S. unit FTX.com to help cover a "liquidity crunch".

Whether this is how Asia plays it on Wednesday remains to be seen. But leaving to one side the intraday chop and churn, particularly in crypto, investors may even feel a sense of comfort with what is a recognizable play-book.

It hasn't been like this in recent weeks.

Despite the gathering storm clouds - including a super-aggressive Fed, looming recession and a darkening corporate earnings outlook - risk assets have broadly carried on rising and volatility indexes have carried on falling.

The normally inverse relationship between stocks and implied volatility has broken down, and in some cases is its weakest in years. This is unfamiliar and potentially dangerous territory for investors, who appear to be inadequately hedged for the aforementioned risks.

One example is the S&P 500 'SKEW' options index of implied volatility, which is at its lowest level since 2009. Investors are paying the least in 13 years to protect themselves against - an outsized fall on Wall Street versus an outsized rise.

S&P 500 'SKEW' index and VIX

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They might want to rethink that. Could carnage in crypto have a material impact on more established, liquid, and better-regulated equity markets? Possibly not ... but possibly.

Wall Street eventually shrugged off its Binance blues and closed up on Tuesday, near its intraday highs. But the VIX index posted its biggest rise in a month. A sign of things to come?

Three key developments that could provide more direction to markets on Wednesday:

China PPI, CPI inflation (October)

Japan Tankan survey (November)

Japan current account (September)