Worldwide Markets Suddenly Awakened

Economy Jamie Simon
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The financial markets of the world were suddenly awakened from torpor of the summer holidays the thought that major central banks will not extend indefinitely asset purchases programs that energizes and stimulates economies artificially exchanges.

The impact on the bond market fully hit the US stock exchanges on Friday and those in Europe on Monday being propagated on the commodity exchanges as well. The sharp rise in funding costs governments shows that investors fear that central banks were left without ideas and without ammunition in their efforts to stimulate the economies.

The financial markets turned yesterday into a sea of red and the central banks are to blame. From stocks and bonds to copper and iron ore, almost nothing escaped untouched by the irritation of investors.

The uncertainties about the trajectory that the US Federal Reserve would give to the monetary policy interest rates in the US and those related to economic stimulus programs implemented by the European Central Bank (ECB) and the Bank of Japan darkened the market horizon.

The wave of risk aversion that swept financial markets last week was made larger. Market shares started the week with declines, some with more than 2%.

The prices of most government bonds went down, forcing yields to climb to unseen levels after a referendum in Britain over Brexit. Also, most currencies have depreciated against the dollar, which drove prices of oil and metals to take it down. The cost of insuring government debt rose by CDS.

“Bank of Japan and ECB are asking questions about the effectiveness of their policies. Add to this the growing likelihood that the Fed increase interest rates sooner rather than later, “said Cathal Kennedy, a Reuters economist of RBC.