Stocks, commodities, gold and crude oil tumbled on Friday as investors see the end of a great liquidity cycle coming to an end, as the US moves to rein in proprietary trading by banks, and central banks begin to roll back easy monetary policies to curb inflationary expectations.
Indian shares rebounded from their worst levels, but still ended near a month low. The S&P 500 Index was down 0.5%, the MSCI Emerging Markets Index declined 2.7%, oil, gold and aluminium fell by at least 1%.
“Comments from the US government on restraining banks’ investment activities weighed down sentiment because it is feared that any such move would hurt fund inflow,” said NK Garg, CEO, Sahara Mutual Fund.
The 30-share Sensex fell 1.1%, or 191.46 points, to close at 16,859.6. The 50-share S&P CNX Nifty fell 1.1% to 5,036. In the broader market, losers outnumbered gainers by 2043 to 842 on BSE.
“Banks will no longer be allowed to own, invest in or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit, unrelated to serving their customers,” US President Barack Obama said on Thursday.
Asset classes across the board lost value after Mr Obama unveiled a plan to limit trading by banks such as JPMorgan Chase and Bank of America to reduce the risk to financial system, which was propped up by taxpayers money last year after banks incurred losses of trillions of dollars. These banks’ trading was a major reason for the record performance of emerging markets last year, including India which gained 81%. So, any restriction on them could reduce investments from the West to emerging markets.
Foreign institutions net sold shares worth Rs 2,415.4 crore while their domestic counterparts net bought shares worth Rs 1,954 crore, according to provisional data from NSE.
Furthermore, central banks, at least in emerging markets, are expected to start raising interest from record lows, as accelerating economies threaten high inflation.
While China grew 10.7% in the latest quarter creating a fear of asset price bubbles, food price inflation in India -- above 15% -- is straining household budgets.
Even the Federal Reserve and the European Central Bank, which have the lowest policy rates, may start withdrawing some liquidity measures launched at the peak of the credit crisis, even as they hold on to low rates to avoid derailing a fragile economic recovery.
“The great liquidity cycle that began about a year ago is starting to draw to a close,” said Citigroup’s Asia equity strategist Markus Rosgen. “The Citi global excess liquidity indicator has already begun to roll over and is decelerating... Asia’s not immune,” Mr Rosgen said in a recent report.
Foreign institutions net bought Indian shares worth over $17 billion in 2009. The Reserve Bank of India in its January 29 meeting is expected to act to cool down prices and the finance minister Pranab Mukherjee may rollback tax cuts next month.
Source: http://economictimes.indiatimes.com/markets/stocks/market-news/Markets-in-a-spin-over-Obama-talk/articleshow/5490270.cms
Indian shares rebounded from their worst levels, but still ended near a month low. The S&P 500 Index was down 0.5%, the MSCI Emerging Markets Index declined 2.7%, oil, gold and aluminium fell by at least 1%.
“Comments from the US government on restraining banks’ investment activities weighed down sentiment because it is feared that any such move would hurt fund inflow,” said NK Garg, CEO, Sahara Mutual Fund.
The 30-share Sensex fell 1.1%, or 191.46 points, to close at 16,859.6. The 50-share S&P CNX Nifty fell 1.1% to 5,036. In the broader market, losers outnumbered gainers by 2043 to 842 on BSE.
“Banks will no longer be allowed to own, invest in or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit, unrelated to serving their customers,” US President Barack Obama said on Thursday.
Asset classes across the board lost value after Mr Obama unveiled a plan to limit trading by banks such as JPMorgan Chase and Bank of America to reduce the risk to financial system, which was propped up by taxpayers money last year after banks incurred losses of trillions of dollars. These banks’ trading was a major reason for the record performance of emerging markets last year, including India which gained 81%. So, any restriction on them could reduce investments from the West to emerging markets.
Foreign institutions net sold shares worth Rs 2,415.4 crore while their domestic counterparts net bought shares worth Rs 1,954 crore, according to provisional data from NSE.
Furthermore, central banks, at least in emerging markets, are expected to start raising interest from record lows, as accelerating economies threaten high inflation.
While China grew 10.7% in the latest quarter creating a fear of asset price bubbles, food price inflation in India -- above 15% -- is straining household budgets.
Even the Federal Reserve and the European Central Bank, which have the lowest policy rates, may start withdrawing some liquidity measures launched at the peak of the credit crisis, even as they hold on to low rates to avoid derailing a fragile economic recovery.
“The great liquidity cycle that began about a year ago is starting to draw to a close,” said Citigroup’s Asia equity strategist Markus Rosgen. “The Citi global excess liquidity indicator has already begun to roll over and is decelerating... Asia’s not immune,” Mr Rosgen said in a recent report.
Foreign institutions net bought Indian shares worth over $17 billion in 2009. The Reserve Bank of India in its January 29 meeting is expected to act to cool down prices and the finance minister Pranab Mukherjee may rollback tax cuts next month.
Source: http://economictimes.indiatimes.com/markets/stocks/market-news/Markets-in-a-spin-over-Obama-talk/articleshow/5490270.cms
Posts
No comments:
Post a Comment