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Markets & Finance News

Wobbly U.S. fiscal response could deepen coronavirus recession

WASHINGTON The U.S. government’s massive effort to nurse the economy through the coronavirus crisis was billed as a send-money-and-don’t-sweat-the-details flood of cash to people and businesses in a $22 trillion system that has ground to a halt.

Regional Markets News

United States Europe & Middle East Asia Pacific

UPDATE 3-UK PM Johnson stable after second night in intensive care battling COVID-19

British Prime Minister Boris Johnson spent a second night in intensive care and was in a stable condition on Wednesday after receiving oxygen support for COVID-19 complications, raising questions about how key decisions would be taken in his absence.

Germany: EU ministers nearly agreed on package, hope we do before Easter

German Finance Minister Olaf Scholz said on Wednesday that he hoped European Union finance ministers would reach agreement in their talks on a virus economic rescue package before Easter after they failed to get a compromise in all-night talks.

UPDATE 1-European shares retreat as coronavirus crisis deepens

* Britain’s ASOS soars 30% on liquidity plans (Adds comments, details; updates prices)

China investors flock to money market funds despite record low yield

Chinese investors have poured cash into money market funds despite falling yields on the low-risk instruments as authorities enact powerful monetary easing to combat the impact of the coronavirus epidemic.

Sterling edges lower as dollar dominates

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

UPDATE 2-ECB urges measures worth 1.5 trln euros this year to tackle virus crisis – sources

The European Central Bank told euro zone finance ministers that the bloc may need fiscal measures worth up to 1.5 trillion euros ($1.6 trillion) this year to tackle the economic crisis caused by the COVID-19 epidemic, officials told Reuters.

UPDATE 2-Britain eases capital raising rules to aid firms during crisis

* Rule easing to remain until further notice (Adds industry body views)

BMW to start producing face masks

German carmaker BMW will start producing face masks to help protect its own staff and the public against the spread of the new coronavirus, Chief Executive Oliver Zipse said on Wednesday.

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GLOBAL MARKETS-Global stocks turn negative as virus death toll mounts

World stocks turned negative on Wednesday as the coronavirus death toll mounted and euro zone finance minister failed to agree a rescue package to help economies recover from the impact of the outbreak.

UPDATE 1-German economy likely shrank by record 9.8% in Q2 due to coronavirus – institutes

Europe’s largest economy probably shrank by 9.8% in the second quarter, its biggest decline since records began in 1970, due to the lockdown measures imposed to help slow the spread of the coronavirus, Germany’s leading institutes said on Wednesday.

European shares retreat as coronavirus crisis deepens

European stock markets headed lower on Wednesday following a two-day rally, as the coronavirus death toll rose in some of the worst-hit parts of the continent, while the euro zone’s finance ministers failed to agree on an economic rescue package.

Europe Inc profit expectations plunge amid lockdowns

Profit expectations for European companies in the second and third quarters continue to deteriorate sharply, Refinitiv data showed on Wednesday, as countries such as Britain, Italy and France implement lockdowns to fight the coronavirus outbreak.

UPDATE 1-Europe Inc profit expectations plunge amid lockdowns

Profit expectations for European companies in the second and third quarters continue to deteriorate sharply, Refinitiv data showed on Wednesday, as countries such as Britain, Italy and France implement lockdowns to fight the coronavirus outbreak.

European shares retreat after two-day rally as Tesco slumps

European shares dipped on Wednesday following a two-day rally, as the number of coronavirus deaths rose again in Spain, while France became the fourth country to report a death toll of more than 10,000.

European shares at one month high on hopes coronavirus crisis may be easing

European shares rallied for a second straight day on Tuesday with investors focusing on early signs that the coronavirus pandemic may be easing.

UPDATE 2-European shares at 1 month high on hopes coronavirus crisis may be easing

* Cineworld rockets 46% on liquidity plans (Updates to close)

European shares climb as coronavirus cases slow

European shares rallied for a second straight day on Tuesday, with investors focusing on early signs that the coronavirus pandemic may be easing, even as major companies still take steps to shore up cash after lockdowns crushed global demand.

European shares jump as coronavirus deaths slow, Germany up almost 6%

German shares jumped 5.8% on Monday to lead a strong bounce in European shares as a slowdown in coronavirus deaths raised hopes that nationwide lockdowns may gradually be eased.

UPDATE 4-European shares jump as coronavirus deaths slow, Germany up almost 6%

* Analysts expect European earnings recession to deepen in 2020 (Updates to close)

European shares jump as coronavirus deaths slow

European shares rebounded on Monday as a slowdown in coronavirus deaths in France and Italy raised hopes that sweeping lockdowns were starting to show results.

EMERGING MARKETS-Stocks, FX snap two-day rally, oil-sensitive currencies slip

* Euro zone currencies drop as EU fails to agree on virus response

FOREX-Dollar gains on rising coronavirus crisis concerns

The dollar firmed on Wednesday as optimism that the coronavirus crisis was slowing waned, increasing investor concerns over the economic impact of the pandemic.

MORNING BID-Italy reels after Eurogroup’s all-night squabble

A look at the day ahead from EMEA senior markets correspondent Saikat Chatterjee. The views expressed are his own. What common bond? Far from announcing anything close to a solution, euro zone finance ministers failed to agree in all-night talks on more support for coronavirus-hit economies. The breakdown came after Italy and the Netherlands squabbled over what conditions should be attached to euro zone credit, blocking progress on half a trillion euros worth of aid.

Hong Kong to offer HK$100 billion COVID-19 relief package – SCMP

Hong Kong government will offer a relief package worth more than HK$100 billion ($12.90 billion) to help workers and businesses struggling with COVID-19 crisis, the South China Morning Post reported https://bit.ly/2woconH on Wednesday.

Nikkei ends higher for third session as Tokyo emergency triggers short-covering

Japanese shares closed firmer for a third session on Wednesday as Prime Minister Shinzo Abe ended market uncertainty by declaring a long-awaited emergency, which led investors to buy in shorted stocks of railway and department store operators.

FOREX-Dollar firms as virus worries return

The dollar found a footing on Wednesday as investors returned to safe-havens, reversing some risk currency gains made on hopes the coronavirus crisis in Europe and New York was slowing.

GLOBAL MARKETS-Asian shares turn mixed, oil rebounds in choppy trade

Asian stocks were mixed on Wednesday after two sessions of sharp gains as investors tempered their optimism about the coronavirus while death tolls were still mounting across the globe.

Nikkei extends gains as Tokyo emergency triggers short covering

Japanese shares gained on Wednesday after Prime Minister Shinzo Abe ended market uncertainty by declaring a long-awaited emergency, which led investors to buy in shorted stocks of railway and department store operators.

Morning News Call – India, April 8

To access a PDF version of this newsletter, please click here http://share.thomsonreuters.com/assets/newsletters/Indiamorning/MNC_IN_04082020.pdf If you would like to receive this newsletter via email, please register at: http://solutions.refinitiv.com/MNCIndiaSubscriptionpage FACTORS TO WATCH 11:00 am: Prime Minister Narendra Modi to hold all-party meeting to discuss coronavirus-related situation in New Delhi. LIVECHAT – GLOBAL MARKETS Chris Weston, head of research at Pepperstone in Sydney, will discuss at 09:30 am IST his outlook on equities and currencies as markets sentiment improved, encouraged by a slowdown in coronavirus-related deaths and new cases, and what to expect from the talks beween Russia and Saudi Arabia and impact on oil prices. To join the conversation, click on the link: https://refini.tv/2P8N0Wp INDIA TOP NEWS • Small businesses struggle to pay wages amid coronavirus lockdown Hundreds of thousands of cash-starved Indian small businesses have either deferred or cut their workers’ wages this month, say industrialists and union leaders, amid a 21-day nationwide lockdown to stem the spread of the coronavirus pandemic. • Indian leaders hesitate to end world’s biggest lockdown India’s 21-day lockdown is set to end next week but several state leaders have called for an extension or only a partial lifting of restrictions, saying is the only way to avoid a coronavirus epidemic that will be difficult to tackle. • India allows limited exports of anti-malaria drug after Trump warns of retaliation India, the world’s main supplier of generic drugs, said on Tuesday it will allow limited exports of the anti-malaria drug hydroxychloroquine that U.S. President Donald Trump has touted as a potential weapon in the fight against the coronavirus. • Indian states scramble for funds as virus takes toll on coffers A three-week nationwide lockdown is testing the resilience of India’s state governments, with analysts warning that essential public services and health care for millions of Indians will be in jeopardy without further federal and central bank support. • Virus slowdown threatens India’s restaurants with bitter aftertaste After growing tenfold in the last decade, India’s restaurant sector fears for the future when a nationwide lockdown is eventually lifted, with customer numbers and spending expected to plunge in the fallout from the coronavirus pandemic. • India asks TikTok, Facebook to remove users spreading coronavirus misinformation India has told Facebook and Chinese video app TikTok to remove users found to be spreading misinformation about the coronavirus following concern about videos intended to mislead Muslims, according to a government source and a letter seen by Reuters. • India to continue prompt fuel exports for at least two more weeks Indian refiners are likely to continue prompt export of refined fuels for at least another two weeks to avoid a complete shutdown after the coronavirus lockdown hit local demand, company officials said. • Indian traders ask court for Amazon, Flipkart antitrust probe restart An Indian retail group has asked a court to allow the restart of an antitrust investigation into Amazon.com and a Walmart unit that is on hold following a legal challenge by the companies, a court filing seen by Reuters showed. GLOBAL TOP NEWS • Japan’s machinery orders rise unexpectedly but darker days seen ahead Japan’s machinery orders unexpectedly rose in February, suggesting business investment remained resilient even as companies braced for a major jolt to demand from the coronavirus pandemic. • China’s Wuhan lockdown ends, but local coronavirus cases rise across country The Chinese city where the coronavirus epidemic first broke out, Wuhan, ended a two-month lockdown, allowing people to leave the city, if they were healthy, amid concerns of a second wave of infections as cases in mainland China rose. • U.S. pushes back on call by OPEC+ to join big oil output cuts Saudi Arabia, Russia and allied oil producers will agree to deep cuts to their crude output at talks this week only if the United States and several others join in with curbs to help prop up prices that have been hammered by the coronavirus crisis. LOCAL MARKETS OUTLOOK (As reported by NewsRise) • SGX Nifty nearest-month futures were trading 1.6% lower at 8,732.00. • The Indian rupee is expected to trade little changed against the dollar as investors focus on the trajectory of the coronavirus outbreak. • Indian government bonds will likely edge lower in early session ahead of a fresh supply of notes at a weekly auction tomorrow. The yield on the benchmark 6.45% bond maturing in 2029 is likely to trade in a range of 6.40%-6.48% today, a trader with a state-run bank said. GLOBAL MARKETS • Wall Street fell on Tuesday, as a drop in oil prices steepened in the latter stages of the session and erased early gains built on tentative signs that coronavirus outbreaks in some of the biggest U.S. hot spots may be leveling. • Asian stocks stepped back after two sessions of sharp gains as investors turned wary on getting too optimistic about the coronavirus while death tolls were still mounting across the globe. • The dollar found a footing as investors returned to safe-havens, unwinding some risk currency gains made on hopes the coronavirus crisis in Europe and New York was slowing. • Yields on longer-term U.S. Treasuries erased some early gains on Tuesday after a Wall Street rally sparked by hopes the coronavirus outbreak may be slowing fizzled out. • Oil bounced back, with U.S. crude jumping over $1, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic. • Gold prices eased as the U.S. dollar firmed, while signs of a slowdown in the new coronavirus cases in major hot spots hurt the metal’s safe-haven appeal and pushed it further away from a near one-month high hit in the previous session. CLOSE FII INVESTMENTS EQUITIES DEBT PNDF spot 75.62/75.65 April 7 (3,801.61) crore (2,823.95) crore 10-yr bond yield 6.41% Month-to-date (6,050) crore (4,044) crore Year-to-date (54,080) crore (73,971) crore (FII investment numbers are in Indian rupees. Source: National Securities Depository Limited) For additional data: India govt bond market volumes Stock market reports Non-deliverable forwards data Corporate debt stories [IN CORPD] Local market closing/intraday levels [IN SNAPSHOT] Monthly inflows [INFLOWS RTRS TABLE IN] ($1 = 75.62 Indian rupees) (Compiled by Swathi Nair in Bengaluru)

GLOBAL MARKETS-Asian shares turn cautious, oil rebounds in choppy trade

Asian stocks stepped back on Wednesday after two sessions of sharp gains as investors tempered their optimism about the coronavirus while death tolls were still mounting across the globe.

Emerging Market Countries and Their Five Defining Characteristics

AsiaPac / Getty Images

Emerging markets, also known as emerging economies or developing countries, are nations that are investing in more productive capacity. They are moving away from their traditional economies that have relied on agriculture and the export of raw materials. Leaders of developing countries want to create a better quality of life for their people. They are rapidly industrializing and adopting a free market or mixed economy.

Five Defining Characteristics

1. Lower-Than-Average Per Capita Income: Emerging markets have lower-than-average per capita income. Low income is the first important criteria because this provides an incentive for the second characteristic which is rapid growth. To remain in power and to help their people, leaders of emerging markets are willing to undertake the rapid change to a more industrialized economy.

The World Bank defines developing countries as those with per capita income of less than $4,035. 

2. Brisk Economic Growth: In 2020, the economic growth of most developed countries, such as the United States, Germany, Mexico, and Japan, was less than 3%.   Growth in Egypt, Poland, Bolivia, and Malaysia, was 4% or more. China, Vietnam, and India saw their economies grow by around 7%.

3. High Volatility: Rapid social change leads to the third characteristic which is high volatility. That can come from three factors: natural disasters, external price shocks, and domestic policy instability. Traditional economies that are traditionally reliant on agriculture are especially vulnerable to disasters, such as earthquakes in Haiti, tsunamis in Thailand, or droughts in Sudan. But these disasters can lay the groundwork for additional commercial development as it did in Thailand.

4. Currency Swings: Emerging markets are more susceptible to volatile currency swings, such as those involving the U.S. dollar. They are also vulnerable to commodities swings, such as those of oil or food. That’s because they don’t have enough power to influence these movements. For example, when the United States subsidized corn ethanol production in 2008, it caused oil and food prices to skyrocket. That caused food riots in many emerging market countries.

When leaders of emerging markets undertake the changes needed for industrialization, many sectors of the population suffer, such as farmers who lose their land. Over time, this could lead to social unrest, rebellion, and regime change. Investors could lose all if industries become nationalized or the government defaults on its debt.

5. Potential For Growth: This growth requires a lot of investment capital. But the capital markets are less mature in these countries than the developed markets. That’s the fourth characteristic. They don’t have a solid track record of foreign direct investment. It’s often difficult to get information on companies listed on their stock markets. It may not be easy to sell debt, such as corporate bonds, on the secondary market. All these components raise the risk. That also means there’s a greater reward for investors willing to do the ground-level research.

If successful, the rapid growth can also lead to the fifth characteristic which is the higher-than-average return for investors. That’s because many of these countries focus on an export-driven strategy. They don’t have the demand at home, so they produce lower-cost consumer goods and commodities for developed markets. The companies that fuel this growth will profit more. This translates into higher stock prices for investors. It also means a higher return on bonds which costs more to cover the additional risk of emerging market companies. 

It is this quality that makes emerging markets attractive to investors. Not all emerging markets are good investments. They must have little debt, a growing labor market, and a government that isn’t corrupt.

Emerging Markets List

The Morgan Stanley Capital International Emerging Market Index (MSCI Index) lists 23 countries. They are Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Qatar, Peru, Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey, and United Arab Emirates. This index tracks the market capitalization of every company listed on the countries’ stock markets.

Other sources also list another eight countries as falling into the emerging market category. They include Argentina, Hong Kong, Jordan, Kuwait, Saudi Arabia, Singapore, and Vietnam.

The main emerging market powerhouses are China and India.   Together, these two countries are home to 40% of the world’s labor force and population. In 2020, their combined economic output (US$32.6 trillion) was greater than either the European Union ($20.9 trillion) or the United States ($19.4 trillion). In any discussion of emerging markets, the powerful influence of these two super-giants must be kept in mind.

Investing in Emerging Markets

There many ways to take advantage of the high growth rates and opportunities in emerging markets. The best is to pick an emerging market fund. Many funds either follow or try to outperform the MSCI Index. That saves you time. You don’t have to research foreign companies and economic policies. It reduces risk by diversifying your investments into a basket of emerging markets, instead of just one.

Not all emerging markets are equally good investments. Since the 2008 financial crisis, some countries took advantage of rising commodities prices to grow their economies. They didn’t invest in infrastructure. Instead, they spent the extra revenue on subsidies and the creation of government jobs. As a result, their economies grew quickly, their people bought a lot of imported goods, and inflation soon became a problem. These countries included Brazil, Hungary, Malaysia, Russia, South Africa, Turkey, and Vietnam.

Since their residents didn’t save, there wasn’t a lot of local money for banks to lend to help businesses grow. The governments attracted foreign direct investment by keeping the interest rates low. Although this helped increase inflation, it was worth it. In return, the countries received significant economic growth.

In 2020, commodity prices fell. These governments—reliant on the high price of a commodity—had either to cut back on subsidies or to increase their debt to foreigners. As the debt-to-GDP ratio increased, foreign investments decreased. In 2020, currency traders also began selling their holdings. As currency values fell, it created a panic that led to mass sell-offs of currencies and investments.

Others invested revenue in infrastructure and education for their workforce. Because their people saved, there was plenty of local currency to fund new businesses. When the crisis occurred in 2020, they were ready. These countries are China, Colombia, Czech Republic, Indonesia, Korea, Peru, Poland, Sri Lanka, South Korea, and Taiwan.

The Bottom Line

Emerging market economies are countries in the process of becoming industrialized economies. They have these following characteristics:

  • Low-to-mid per capita income.
  • Brisk pace of economic growth.
  • Commodity and currency swings.
  • High market volatility. This may be caused by natural disasters, external price shocks, or domestic policy instability.
  • Huge growth potential.

Emerging markets offer large opportunities for foreign investment. Ideally, those that invite sound investment must have a stable government with low corruption incidences, low debt-to-GDP ratio, and a good pool of labor. Many of these developing markets though pose less than ideal conditions. They may expose investors to great risk from:

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