Tags: Markets | Fear | Obama | Moves

FT: Markets Fear Obama Moves

By    |   Friday, 21 May 2010 09:21 AM

Stocks around the world have plummeted amid concern about new financial regulation measures adopted by the United States and Germany.

“The lack of clarity from the politicians has shattered confidence,” David Owen, chief European financial economist at Jefferies, told the Financial Times.

In the United States, the Senate on Thursday night approved a bill increasing the government’s role in policing banks and financial markets. Earlier in the week, Germany banned "naked" short selling of some stocks and bonds

Large U.S. banks warned that proposed changes in the Senate bill – including provisions forcing them to spin off swaps desks and banning them from proprietary trading – were contributing to the market turmoil, an analysis privately supported by some regulators.

The moves helped the Dow Jones Industrial Average plunge 3.6 percent to 10,068 Thursday, down 10 percent from its April high.

The S&P 500 fell 3.9 per cent, bringing its losses since late April to 12 percent and pushing it into “correction” territory, while the Vix, Wall Street’s “fear gauge,” leapt to a 13-month high.

Oil fell as much as 8 per cent while the Australian dollar and Brazilian real both fell more than 3 per cent against the US dollar.

In Asia, Japan’s Nikkei 225 index fell 2.45 percent Friday. In Europe, the Euro Stoxx 50 Index slumped 2.47 percent by mid-afternoon Friday.

The rout in stocks has been a boon for U.S. Treasury bonds, as investors across the globe have sought a safe haven. The 10-year Treasury yield has dropped to 3.17 percent, its lowest level in almost six months.

Many experts expect Treasuries to continue their gains, boosted by Europe’s ongoing financial crisis.

“This will amplify the impact of higher global risk aversion,” El-Erian wrote in an Email, according to Bloomberg.

“Some areas — like the U.S. Treasury bond market — will also feel the impact of capital inflows on account of flight-to-quality.”

El-Erian’s colleague, Bill Gross, lifted the portion of Pimco’s Total Return Fund devoted to U.S. government-related debt to a five-month high in April.

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Stocks around the world have plummeted amid concern about new financial regulation measures adopted by the United States and Germany. The lack of clarity from the politicians has shattered confidence, David Owen, chief European financial economist at Jefferies, told the...
Markets,Fear,Obama,Moves
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2010-21-21
Friday, 21 May 2010 09:21 AM
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