Tapering Talks Send Global Markets Into A Tailspin
DSIJ Intelligence / 21 Jun 2013
The global markets focused on just one factor yesterday – the Fed. Heavy losses were seen across the globe today. Will today be an extension to yesterday's sell-off?
The global markets focused on just one factor yesterday – the Fed. Federal Reserve Chairman Ben Bernanke said yesterday that the central bank may begin to scale down its bond-buying programme later this year if the economy continues to show strength.
This resulted in a heavy sell-off in Asian markets, which was followed in Europe and then in the US. While the Indian markets dropped by more than 2.75%, US fell between 2.27% and 2.51% and Europe between 2.97% and 3.66%. Asia saw heavy losses yesterday. These losses have extended today and the markets are trading significantly lower. Asia Dow and Singapore are trading lower by 0.96% and 0.68% while the Nikkei, Hang Seng and Shanghai are trading lower by 1.89%, 1.64% and 1.25% respectively. The SGX Nifty was seen trading lower by 61.50 points at 07:40 AM earlier today.
Any guesses on where the Indian markets are headed today? Well, there is no doubt they are headed for a negative opening and a volatile day ahead. Noteworthy about yesterday’s trading was how some of the cues and economic indicators only supported the downfall and probably aggravated the situation.
Manufacturing activity in the Philadelphia region jumped in June to its highest level since 2011. This only but gave the markets a reason to worry more. These days, interestingly, the markets have been displaying copious amounts of disappointment towards healthy economic data and cheering over weak data points. After all, monetary policy has taken centre-stage, rather the entire stage.
Other factors affecting the markets were cues from China and England. In China, the preliminary reading of the HSBC manufacturing Purchasing Managers’ Index (PMI) fell to 48.3 in June 2013, which is the lowest level seen in nine months. While the reading in May 2013 was 49.2, any reading below 50 marks contraction, thus showing a worsening in the situation.
The Bank of England identified a 27.1 billion pound capital shortfall for the top five British banks. This sent banking stocks spiraling downwards and the FTSE down with the biggest loss in 21 months.
It was a bad day indeed, globally. The shock clearly hasn't been completely absorbed by the markets. There is more to the downfall and that will be seen today.
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