The US subprime mortgage monster has already eaten up many markets. All major central banks have come up to protect their economies. Western economies seem to have somewhat left the darker period behind, but budding Asian economies seem tied in the knot of subprime elf.
Wall Street shows signs of recovery - as market succeeds in wining back investors confidence, hoping that European markets slowly and steadily feel the ease as US markets and rebound after month of ruckus.
While trading, the Wall Street saw dramatic recovery as the Dow Jones clawed back more than 300 points. Shares also strengthen over the rumor of Federal Reserve rate cut.
Despite, gains in the US market, Asian markets are facing stiff falls. To alleviate the currency crunch, the Bank of Japan has pumped funds into the banking system. Japanese Bank has intervened thrice in the money market as recently it injected $10.7bn.
Japanese economy can feel the heat, as investors are worried about a slowdown in the US economy that will hit exports from Asia. In the middle of all rumpuses, there is speculation that the Bank of Japan is raising interest rates next week, which could create mishmash in the market - that could mar the small investors.
It’s not only Nikkei in Tokyo, which is down by 4.2% or 674.3 points at 15,474.15, but all major Asian markets that are feeling heat from the subprime’s flame. Hang Seng is down by 3.3% or 688.8 points at 19983.6, whereas Indian Sensex is down 421.86 points or 2.94% at 13936.35, (it’s notable that Sensex was at business at over 15,500, only a week before).
It was long speculated that the Subprime woes would not affect developing Asian region. But market volatility proved all speculations wrong. Taking lesson from the plunging Asian market and weighted business with west, Australia is taking precautions; the Australian central bank is intervening to support its currency for the first time in six years. New Zealand has already cleared its intention of intervening in the market, while southeast nations are weighing the market precariousness, before taking any step.
Via: BBC
