-- AM Analysis
Global indices are in the midst of the most volatile period
Global indices are in the midst of the most volatile period for equities in quite some time, spurred on by a crash - and now recovery – of emerging market currencies. Major equity gauges began to slide last Thursday when a basket of currencies, most belonging to emerging economies & various Asian countries, started to show unexpected weakness. Before this week’s rebound, the 20 most-traded emerging currencies had lost about 10 percent in the past 12 months. This equates to the worst annual slide since 2008 with more than $460 billion of market value wiped from emerging market equities.
The recovery has been led by the Turkish Lira with the currency registering its biggest jump since 2008. South Korea’s won jumped the most in four months, spurred by a record current-account surplus, while the yen weakened versus all 16 major peers. The lira has rebounded 10 percent from a record-low 2.39 per dollar reached on Monday, almost erasing this month’s decline. The central bank raised the one-week repurchase rate to 10 percent from 4.5 percent late yesterday at an emergency policy meeting to support the currency.
Federal Reserve policymakers are set to meet tonight with market participants expecting the central bank to reduce stimulus by a further $10 billion this month. Whilst the Fed have not confirmed this, economists at this stage believe purchases will be cut by $10 billion at each of the next six FOMC meetings, with the program ending no later than December. This comes after the Central Bank announced its first bout of cuts to stimulus last month amid falling unemployment and improving data.
Max Cohen
-- PM Analysis
European stocks and US futures drag ahead of the FOMC meeting
European stocks and US futures drag ahead of the FOMC meeting this evening, with many investors anticipating the Federal Reserve will trim stimulus by a further $10 billion this month. A further $10 billion will bring total bond purchases down to $65 billion a month with many economists believing the Fed will continue to trim for the next six FOMC meetings.
Sainsbury’s shares were hit hard today after it was announced that Chief Executive Justin King will step down of the British grocer in July after a decade at the helm. This could be a shock for investors as King has managed to treble underlying profit during his term. Kings departure will make investors nervous as to how well his successor will defend profits especially with income strapped consumers and further competition from discount supermarkets.
WTI Crude retreated from the highest level in four weeks before government data from the US is forecasted to show that inventories rose. Brent crude however was on the up, increasing the differential between the two previous liquids.
Lee Mumford
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