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When every other stock market around the globe is having a sell-off for two consecutive days now, it is cannot be denied that the colour of the day is red.
Since Uncle Ben Bernanke issued his statement yesterday, virtually every major stock market in the world was mired in red, as if also bleeding upon knowing that designers Dolce & Gabbana were sentenced to jail for failing to pay taxes due.
But that’s not the only bleeding reality that glared the financial world this week, or at least a portion of it. The President of the bailout island-nation of Cyprus handed to its financial system’s creditors a letter that contains the grieving sentiments of businesses whose working capital are bleeding crimson with the imposition of huge taxes to raise the €10 billion agreed fund in exchange for a bailout.
One had to probably underscore the eight banks named by the prosecutors after Tom Hayes became the first person to be charged with five counts of fraud in the infamous interest rate manipulation of LIBOR.
As of press time, European stock markets like FTSE 100 was down 3.1%, Dax tumbled 3.4%, and CAC 40 sunk 3.7%. In the US, Dow Jones fell 1.5%, Nasdaq slipped 1.6% and S&P 500 fell 1.76%.
What was supposed to be good news turned out to be bad one for equity holders and market players. Everybody knows what Ben Bernanke said by now and it was supposed to send a message that the US economy is not simply standing on its feet but more so, moving forward, even only at a limping pace.
It was supposed to say that more people have jobs now and subsequently, more capacity to spend, which in turn drive GDP and boost bottom lines of businesses. But the fear of slowdown in pumping the Greenback into the economy that will in turn tighten credit a little bit is something equity holders and traders cannot deny.
But if one would presume that going “real” is a better option, think again. Metals like gold, silver, and platinum values are also eroding, with prices at a hurtful low and blow to the mining industry, many members of which were trading in the red zone following the Bernanke statement.
A Little Green on the Side
But that classic “my loss is your gain” or vice versa was notably apparent in the way the currency was trading – a little accent of green in a sea of red. The Dollar has regained its position as THE money during these chaotic times, having appreciated against the Euro, the Japanese Yen, and the Pound Sterling.
Yet foreign exchange trading is as fickle as the equity markets, even much faster to switch sentiments at the slightest prodding of a tiny statement. So the gains of today may very well be lost tomorrow.
In all these, some blood red wine may have been served to a few people at Ted Baker, as the British clothing business revealed it had a very fashionable half year with revenues up nearly a third.
A defiant green at the close of trading Thursday in London had Ted Baker earned over 230 pence, or over 15%, to 1,700 pence, though only very few people noticed. It’s understandable. The world is so focused on the macro conditions that ignoring it is simply subversive. Bernanke’s message got the market talking. And so I did.
