Tags: Dollar Rises | Emerging Stocks Fall on Easing Jitters

Dollar Rises, Emerging Stocks Fall on Easing Jitters

Monday, 18 Oct 2010 07:14 AM

Investors pulled back some of their bets on additional monetary easing by the Federal Reserve, lifting the dollar and generally selling off equities on Monday.

Emerging market stocks, one of the main beneficiaries of expectations of more quantitative easing (QE) from the Fed, were particularly hit.
Wall Street also looked set to open lower.

MSCI's emerging market stock benchmark was down 1 percent on Monday, after hitting a 2-1/2-year high last week. Its fall helped dragged the MSCI all-country world index down more than a third of a percent.

Equity markets have been rallying strongly over the past few weeks as the prospect of more QE asset purchases has increased. On Friday, Fed Chairman Ben Bernanke confirmed the likelihood of more easing.

Monday's market moves were probably motivated in part by a desire among investors to take some profits from recent rallies and to adjust positions to reflect slightly more caution, particular ahead of the U.S. earnings season.

The U.S. earnings reporting period picks up steam this week, with 109 S&P 500 companies and 11 Dow components due to report. Among them will be Goldman Sachs, Bank of America, Citigroup and Morgan Stanley.

"What's behind this is a tug-of-war among views on the United States implementing additional easing measures. If earnings results show that U.S. companies are actually generating strong profits, that would weaken the case for easing expectations," said Kazutaka Oshima, president of Rakuten Investment Management in Japan.

The FTSEurofirst 300 index of top European shares bucked the trend, rising 0.1 percent after a gain of 1.4 percent last week. The benchmark is up more than 67 percent from its lifetime low of March 2009.

Earlier, Japan's Nikkei closed flat.

STRONGER GREENBACK

The U.S. dollar bounced from a 10-month low against a basket of currencies while the euro continued a retreat from an 8-1/2 month high.

The dollar index was up half a percent after losing nearly 5 percent in the past month as investors increased their QE bets against the dollar.

QE effectively requires the Fed to print more money, thus increasing supply and keeping interest rates at unattractively low levels.

"The dollar's move down has been extremely aggressive, and there are investors wondering whether or not too much quantitative easing has been priced in or not," said Jane Foley, senior currency strategist at Rabobank.

"(It) has been sold off in recent weeks but there are plenty of opportunities to book profits. So I expect it to see some choppiness ahead of the next Fed meeting in November."

The euro shed 0.6 percent $1.3889, pulling away from its highest in more than eight months of $1.4161 hit on trading platform EBS on Friday.

Euro zone debt was mixed with yields fall slightly on longer-term bonds.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
StreetTalk
Investors pulled back some of their bets on additional monetary easing by the Federal Reserve, lifting the dollar and generally selling off equities on Monday. Emerging market stocks, one of the main beneficiaries of expectations of more quantitative easing (QE) from the...
Dollar Rises,Emerging Stocks Fall on Easing Jitters
457
2010-14-18
Monday, 18 Oct 2010 07:14 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved