Hope everyone is enjoying the holiday.Am I enjoying the day?No.Hold on.I am not holding any open positions to worry about.The reason why I am not enjoying the day is I am getting bored.The compulsive trader in me doesn't like me sit idle and do nothing.The global sell off is something to be worried about now.The European indices ended down by almost 2%. The Italian Index is down by 3.78% .The Italian Bond yield was trading above the 7% mark though the PM of Italy had offered to resign.The higher borrowing cost is something which doesn't go well with the markets and with the economy too.Adding fuel to the fire ,Clearing house LCH.Clearnet SA raised the initial margin requirements of Italian Bonds.The changes come into effect from today and it will affect the margin calls from tomorrow. With $2.6 trillion in Government debt , it is going to be very difficult for Italy in the near future.
In the US , the markets ended negative sending the S&P 500 to its biggest decline since August 2011.All the US indices were down by more than 3%. Nikkei is trading down by 2.7% at 11.25 AM IST.The Japanese machinery orders fell more than expected in September due to rising Yen and the global turmoil.The exporters are facing huge pressure as the Yen is trading near the post WORLD WAR II highs against the Dollar.And in the domestic front Rupee hits 52 week low of 50.25 against the dollar. As in my yesterday's article I have mentioned, the European crisis is a big negative for our nation.The rising inflation,falling rupee,increase in imports of coal,crude oil,decline in exports as the demand from European nations are falling, we are in for a tough time looking forward.The trade deficit is not going to narrow anytime sooner as the foreign inflows are getting dried up.
We have bad news from all the directions.Deutsche Bank's Michael Spencer says,"The possibility that European banks might reduce their exposure to Asia as part of their recapitalisation effort is something that has to be taken seriously". This will affect nations like Vietnam, South Korea, Indonesia and India.If the European Banks are forced to cut back lending(Europe's banks account for two-thirds of the foreign lending to global emerging markets) it is going to be a tough time for us.Morgan Stanley says there would be around $500 Billion drop in lending to emerging markets.And a report on foreign exchange reserves of the emerging economies indicates that the Chinese foreign-exchange reserves fell by almost $61 Billion and the Indian reserves fell by almost $11 Billion.
Overall we are in a worst situation now than we were in 2008.The American mortgage crisis did not affect the emerging economies much.But this European crisis is triggering a bigger global turmoil and some of the domestic sectors like aviation and real estate sectors are facing a huge cash crunch now.Let us discuss about that in detail in another article.
Nifty is expected to open below 5200 tomorrow and we may breach 5000 in the immediate future and will drift down to 4900.
Enjoy the day.Happy Guru Nanak Jayanti To All our readers.
