The Blubber

"There is no reason that a 0.2 percentage point rise in the U.S. unemployment rate should trigger a 12% collapse in the price of Japanese stocks. Yet that's what happened Sunday overnight," per Axios.

The U.S. selloff on Friday was understandable in light of signs of economic weakening from July's jobs data. However, the global market decline that began Sunday night appears to be driven by international financial connections and the unwinding of crowded trades.

These factors are causing market movements that far exceed what is warranted by changes in the U.S. economic outlook. This is a key reason why the Federal Reserve will be cautious about acting impulsively by cutting interest rates before its September 17-18 policy meeting, despite increased market speculation and rising odds of a rate cut since Friday.

Why risk exacerbating the panic when financial markets have already adjusted to lower borrowing costs in anticipation of scheduled rate cuts?

What they’re saying: “The law”—referring to the Federal Reserve Act that authorizes the central bank—“doesn’t address the stock market; it’s about employment and price stability,” said Chicago Fed President Austan Goolsbee on CNBC Monday morning.

Between the lines: There are times when markets seem to move erratically, with the scale of the movements disconnected from actual economic changes.