Are market and economic uncertainty brewing?
*The Wall Street Journal, by Matthew Walter and Neelabh Chaturved, June 11, 2013
Volatility Hits Markets as Investors Watch Central Banks
”U.S. stocks fell and the dollar slumped, extending a bout of market turmoil as investors puzzled out the implications of a possible tightening of central-bank easy-money policies.
The sharp moves came after volatility in global markets overnight as investors fretted that the U.S. Federal Reserve would soon move to cut back on the money it has been pumping into the economy.
The Dow Jones Industrial Average saw a day of wide swings, falling more than 150 points as trading opened Tuesday, recovering to trade briefly in positive territory, and then sinking back to close down by triple digits. The dollar fell more than 3% against the Japanese yen to below 96 yen to the dollar before recovering somewhat, touching its weakest point since early April. Treasurys, which had slumped earlier Tuesday, pushed higher as investors shed riskier assets.
The gyrations in U.S. markets came after stocks, bonds and currencies from the Philippines to Spain came under pressure Tuesday. Money streamed out of emerging markets, while a selloff in government-bond markets across Europe led to higher yields from Greece to Germany.
Financial markets had stabilized during New York trading hours, but turned south again in the afternoon, underscoring how a lack of clarity about the Fed’s thinking has made markets more volatile.
‘People are less certain today than they have been in the last two years,’ said Peter Gorra, head of G-10 currency trading at BNP Paribas in New York. ‘They’re looking over the edge and they’re not sure what’s on the other side.’
Traders pinned the blame for the market’s ups and downs on sensitivity to signals from central bankers, in particular the Bank of Japan and the Federal Reserve.
In the U.S., investors have been rattled by Fed Chairman Ben Bernanke’s suggestion last month that the central bank is considering a move to wind down its bond purchases.
While officials have tried to send signals in recent weeks that any changes will be gradual, traders are increasingly convinced that the U.S. central bank’s next move will be to begin tapering the pace of its bond buying program, removing a key source of support for asset prices even as concerns about a slowdown in global growth are mounting.”
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