Continuous drop in Stocks, bonds and yields is expected to occur as global economic condition gets worst. Investors cling on for relative safety by buying up gold and top-rated bonds and dumping stocks on Thursday, February 11, causing the dollar to hit its 16-month low against yen. It has been the dollar’s worst week noted since the Lehman crisis arises in September 2008. The current standing of the U.S. dollar against the other major currency is known to be a result of the investors’ sentiment relative to the direction of the global economic crisis together with the cautious comments that leads to the presumption that no near-term interest rate hike is likely to occur in the next days. This came from the head of the Federal Reserve itself causing panic in many investors in the U.S. stock market.
The drop of the dollar’s value is causing a ripple effect in other stock markets. According to investing.com’s Thursday report, data shows that the “European stocks fell (FTEU3) over 3 percent to a 2-1/2 year low with banks plunging 6 percent and the Swedish crown tumbling as its central bank waded in with a surprise cut to its already deeply negative interest rates”. At the same time, other markets are also affected as reported in the same news release stating “Britain’s FTSE 100 (FTSE) dropped 2.5 percent, Germany’s DAX (GDAXI) fell 3 percent, and Italian (FTMIB) and Greek shares (ATG) both lost 5 percent on their familiar banking sector and bailout worries”. Bonds and yields are also experiencing drop off as traders dump riskier assets.
This has been a struggling time in entities like Wall Street, to name a few, which was expected to start almost 2 percent in red. This situation is foreseen to continue and is feared that market condition will worsen in the next days. Rabobank European strategist Emile Cardon explained briefly the difference of the current situation against the past crisis emphasizing the nature of the crisis itself. According to her, the risk-off mode has come back very quickly because the situation is like several smaller crises are found everywhere (China, Portugal, U.S., commodity sector, banking sector, etc.) and is combining into one big crisis.