Jun 5, 2009|
Emerging markets leading the way
A couple of months ago, Indian business dailies carried snaps of investors and brokers, either standing outside the Bombay Stock Exchange (staring at the ticker) or sitting in their offices, with different expressions of anguish. It is quite the opposite nowadays. Well naturally, considering that the Sensex has moved upwards to cross the 15,000 mark.
Nothing describes the word 'optimism' better than run up we have seen in the past three months. These have been the sentiments prevailing in emerging markets such as China, Brazil and India. As the IHT puts it 'Stock markets in developing countries are riding a wave of optimism.' In hopes that the global economy is recovering and that the developing nations worldwide are leading this recovery, markets have surged tremendously over the past few months.
However, the gains recorded in India have been greater that those witnessed in Brazil and China. There have been various reasons for the same – UPA coming back to power, improving auto sales and growth in production levels of core sectors amongst others.
If we look at the chart below it gives a sense of how things have changed and how they differ between those of developed markets.
Record low interest rate regime continues in Europe
The two most influential central banks in Europe decided yesterday to continue to keep interest rates at their extremely low levels. Also, they chose to give a further push to their asset buying programs that they have been conducting to stimulate their economies. The ECB (European Central Bank) decided to continue to keep its key interest rate at an ultra low level of 1% (which was 4.25% in October 2008). The Bank of England too kept its main rate unchanged at a record low 0.5% (down from 5% six months ago). It also extended its bond buying program totaling US$ 206 bn for two more months. ECB president Mr. Trichet felt that the current level of rates was "appropriate" given economic conditions. In its new GDP projections published yesterday, the ECB indicated that Europe's GDP would contract 4.1 to 5.1% in 2009. For 2010, the projected range was from a 1% contraction to growth of 0.4%.
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