Those wobbly markets ...

money.jpg Fear of inflation in USA, rising interest rates, a falling dollar, and high energy prices ... These factors above combined are beginning to make investors more risk averse. Consequently, the recent week has seen markets in Europe and USA exhibit a strong increase in volatility with a steady fall to follow.

(From the FT)

"European equities endured another tough session on Thursday as investors steered clear of resource-related stocks amid continued volatility in commodities markets."

(From the FT 2)

"US stocks were broadly flat at midday on Thursday as bargain-hunting helped stem the sharp sell-off of the previous session. Shares in focus included Limited Brands, Intuit and UnitedHealthcare.

“I’m a little surprised that we’re not seeing a bigger snap-back in the stock market today [Thursday],” said Jim Paulsen, chief investment strategist at Wells Capital Management, who pointed to falling bond yields and the release of economic data that should have buoyed the market by easing interest rate rise fears.

“We got a reassuring [jobless] claims number saying job growth was weak. For stocks the big fear was this continued rise in rates. It [now] seems to have gotten a little better.”"

(From the Economist)

"THE American economy is in a nervous state, and the news seems to have trickled through to investors. The Fed statement accompanying last week’s rate hike was more equivocal than investors wanted about the possibility of a June pause in its 16-month rate-raising streak. That rattled markets. The Dow Jones Industrial Average, which had been inching closer to its record high of 11,723, began to slide back down again. On Wednesday, after new data on consumer and producer-price inflation came in higher than expected, the Dow Jones dropped more than 200 points to close at 11,205. The anxiety has spread to markets on the other side of the Atlantic, with London's FTSE 100, Germany's DAX and France's CAC 40 all losing roughly 3% of their value on Wednesday alone.

Commodity markets have also shown recent signs of nerves. They have been soaring in recent months, thanks to the strength of the global economy and, many believe, speculative money from institutional investors. The sharply rising price of inputs such as copper, oil and zinc has been a big part of the inflation worries that are now pressing on equity markets. On Monday, those trends appeared to reverse. In London, copper slumped as much as 9% in intraday trading, while zinc fell by as much as 12%. By Wednesday, they had rallied, recouping most of their losses, but the wobble is a reminder that what goes up will also, eventually, come down."

(The Buttonwood column from the Economist) 

"OH, WHAT a happy few days it has been for the miserable little commentating class. Too wise to have thrown their own money with the hedge funds’ at Turkish lira, long-dated copper derivatives, Japanese titanium processors or indeed American blue chips, the scribblers have long been giving warning of dire things afoot: of mounting global macroeconomic imbalances, of vertiginous rises in the price of commodities fed only by the rises that preceded them, and of doom to come. Then, late last week and early this, almost everything seemed to fall at once: the dollar, world equities and, with a vengeance, commodities. Money was said to be seeking safe havens, but where to find one? With the financial elite in a panic, cancelling dinners at Nobu, rarely can the scribblers have so fondly patted the pockets containing their piddling pay-cheques.

Things turn fast. The most recent edition of The Economist reported a new high for the Morgan Stanley Capital International global stockmarket index and new records for the prices of copper and platinum. It noted that stockmarket volatility was abnormally low—a mark, very possibly, of investor complacency—but that the breeze was now starting to lift the corners of the picnic blanket. In very swift order, winds have given the blanket a thorough shake."