Global Equity Markets which have been quite buoyant till now from last few weeks are facing a new issue : Great Jobs report in US as there were net additions in jobs and unemployment rate falling to pre pandemic lows.
If you are wondering, how such good news is bad news for markets?
Well, it is because, Traders currently see a 73.5% probability the U.S. Fed continues the pace of 75-basis-point rate hikes for its next policy decision on Sept. 21 to tame soaring inflation.
And that is not a great news for Emerging markets esp. , as dollar index spike up creates depreciation in currency and a spike in bond yields across the board indicates more activity in risk averse instruments thereby leading to a fall in equity.
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As “negative” news such as Taiwan- China face off is having close to zero impact on market’s upward trajectory, market is in a mood to climb up the wall of worries, As counter intuitive and silly as it sounds, market now needs negative news more than positive ones
Even rate hikes are good news for banks at least in India. They hike loan rates immediately but take time to pass on hikes in deposit rates. So their profitability will increase.
Hahaha thats true. Passing on of higher interest rates is almost immediate.
But, after sometime it starts showing affect on other sections of the economy as higher EMIs and interest rates leads to softening of demand which affects banks negatively. Also one more key factor to consider is, Banks have to report losses in their MTM positions in their bond portfolio as yields spike
Markets are not usually surprised by these events, because these are not nothing new. In fact, certain events are just part of parcel of the economy, even war is not a black swan event. All these are incorporated into investing models of big money.
Our market is small and young, not the US market. And investors and more particularly traders who have been in our market for some years check these things. Unless there is a sudden big move, nothing happens.
And then there are people who move the market, who move by their edge or simply by their capital. They can create a movement.
As retail traders, what we have is our limited resources and a plan to utilize them.
Looks like market has discounted most of this news. Also, one needs to understand that market can be erratic and may not react to the news as you expect it to.
