Daily Management Review

Stocks, Oil and Emerging Currencies hit by Growth Fears


Rising anxiety about the health of the global economy fueled by fading expectations for an imminent U.S. interest rate hike resulted in falls in stocks, oil and the emerging market currencies.

Share values fell to a two-year low in the Asian market while German markets saw a fall in share prices that have raised fears of a worst month in three years. Stock prices in Britain hit the lowest point since January this year. The stocks in the US are also expected to tumble following the falls in the major markets.

Speculations and anticipations by investors over the rate of growth in Chinese as well as the US economies out pressure on the emerging market currencies. After authorities abandoned its peg and let the currencies float, the Turkish currency lira hit a record low and Kazakhstan's tenge plunged around 25 percent.

"Asian shares tumbled, pressured by lower oil prices and a slowdown in China while the latest Fed minutes raised concerns over the strength of the global economy, questioning whether rates will be raised next month," said David Papier at ETX Capital in London.

Reports about details of minutes from last month's Federal Reserve monetary policy meeting indicates that most of the officials in the broad agreed that the U.S. economy was poised at the juncture where interest rates should move higher but there were also concerns expressed over the lagging inflation and a weak global economy and most felt that it would be too big a risk to commit to a rates "lift off".

There was a fall of 1.3 percent in the FTSEuroFirst index of 300 leading European shares while the Germany's DAX fell 1.2 percent to reach its lowest since January with a total fall of about 6.7 percent so far this month. There was a 0.5 percentage fall in the British FTSE 100 share index to reach 6370 points where resources and energy stocks have a heavy weighting.  It is also at a seven-month low.
There was a fall of 1.7 percent, a two year low, in MIAPJ0000PUS index, MSCI's broadest index of Asia-Pacific shares outside Japan. Thursday was also the sixth day when the index fell in the longest losing streak this year. There was a fall of 0.9 percent in Japan's Nikkei.

"Financial markets today are digesting the July 28-29 minutes, and the collective wisdom seems to be that they are on the dovish side," said Rob Carnell, chief international economist at ING.

There was also a fall in the value of dollar against t her major currencies and reached a three-week low against the yen before recovering to 124.00 yen and against the euro.

U.S. crude oil CLc1, was down 50 cents at $40.30 a barrel by 1030 GMT, after hitting a new 6-1/2-year low of $40.21.

"Markets are nervous of risks and investors are pulling funds out of emerging economies and resource exporters," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
(Source: www.reuters.com)

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