By N Prasad Investors confidence has terribly fallen to the bottom and they are in dilemma that where to invest. Stocks all over the world are performing in poor shape despite of governmental efforts. Stocks of the beckoned companies are falling as like playing cards palace. Stock indices across the world are falling incessantly in recent past. Week by week red candles (candlestick charts) are making situation more grim than the previous turmoil.
The Nikkei 225 Average delivering its worst single-day performance in more than two decades. The benchmark took home a weekly loss of 24%, while more than $650 billion of wealth was wiped off during this period in Tokyo. Indian BSE SENSEX made a low of 10,239 levels. HENGSENG has broken the 15,000 levels, Shanghai hovering at 2,000 marks. Straits Times Index below 2,000 marks to 1,942.50 on Friday. German DAX, French CAC, UK FUTSEE, United States’ Dow Jones, Nasdaq etc. are in deep red.
Coordinated rate cut effort by the world’s major economies is yet to yield the upshots. The Federal Reserve, the European Central Bank, the Bank of England and the central banks of Canada and Sweden all reduced primary lending rates by a half percentage point. Reserve bank of Australia has cut rates by 1%, and Reserve Bank of India has cut rates by 1.50 %. This will pour huge money into the reeling markets across the world. The UK government had pumped 50 billion pounds ($87 billion) of capital into the country’s main banks as part of a rescue plan. Earlier US government passed USD 700 billion rescue package.
The U.S. dollar surged to a 15-month high against a basket of other major currencies on Friday as plunging stocks and persistently tight credit markets prompted investors to scramble for cash in the world's reserve currency. Dollar index, which tracks the value of the greenback against a basket of six currencies, rose 1.25 percent to 82.450, after rising as high as 83.191, the highest since June 2007. The 15-nation euro bought US$1.3532. The British pound also fell sharply against the dollar buying US$1.6845. The dollar bought 98.64 Japanese yen. It is the pound's lowest point against the dollar since November 2003 and the dollar's lowest point against the yen since late March of this year.
A continuous flow of bad news about global financial companies added to investors’ fear. The crisis has diffused from west to east. On Friday (Oct 10) Japan's Yamato Life Insurance Co. filed for bankruptcy protection from creditors, reportedly becoming the first in the industry to do so in seven years. Earlier Lehman Brothers Holdings had filed chapter 11in United States.
Gold is still considered safe heaven investment commodity but investors are still confounded with volatility. Even though Gold has moved $100 either side in a day last month without giving enough clues. Technical indicators are highly ignored. No one ever thought silver will fall apart in this manner; it has fallen below $9.5 an ounce levels, before closing to near $10 an ounce levels last week. Base metals are heading towards extreme bottom levels. Copper had breached the $2.5/pound levels. Aluminum, lead and zinc are also in the race of the worst performer.
Policy makers are in pathetic situation, they are required to meet with the two devils simultaneously namely rising inflation and slowing economic growth. Albeit all efforts starting from rescue plans to rate cuts governments are still not able to mitigate the financial fiasco. Recession fear all over the world is hovering and it is aggravated since third quarter starting because the bad news is welcoming the people every morning. Investors are losing confidence in the stocks but they have alternative to invest in the commodities especially in the bullions.
Status quo does not forebode well for the stock markets and investors are likely to turn towards the safe heaven investment commodity. Investors consider the gold as a good asset to invest in existing situation. Silver may also join the party along with the gold but later will remain first choice of the investors. If situation prevails, gold may embrace the $960 an ounce level and silver may also $15 an ounce levels in the end of this quarter.
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