Markets versus Crisis Mex Nepal

Surprise rise in Stock indices for the last one year is still a question of debate for many investors. Its because of fresh new announcements made by European Central Bank and Federal Reserve that rejoiced market participants to go for long positions despite economic downturns which is facing by major economies across Europe, China, Japan and US. Rating agencies which are the favourite of Bears in times of economic slowdown are the only entities that stand in line with real economy. The real state of the US economy is lagging behind scenes with US unemployment at higher levels and European powers like Spain, Greece, Portugal and Italy which is facing significant unemployment levels near 25%, on verge of bailout talks with European Central banks. Market participants are also closely watching for a possible Greek exit from the Eurozone which would be a major disaster to global markets. The irregularities in Euro-zone economies came into limelight in the year 2009 after the great stock market crash that happened in US on 2008. On October 2007, Dow Jones hit 14,000 mark before the start of its steep slide towards 6600 by March 2009. Now Dow is near to 14,000 levels with escalating tensions surrounding US economy once again including upcoming US Presidential election on November 2012 followed by Fiscal cliff expected to turn around by January 2013. Also unemployment which is still hovering above 8% in US economy is a worrying factor for global markets. Eurozone crisis started getting worse after Greece saw Socialist party coming into power with later announcing 300 billion euros debt, the highest in the history with credit default spreading to heavily indebted countries such as Portugal, Ireland, Spain and Italy. This paved to profit booking across the globe with Euro and most of currencies across the world falling against dollar with high intensity. Rescue packages were coming into the market by Eurozone members and IMF with 110 billion euros for Greece and around 85 billion euros to Ireland on November 2010 followed by 78 billion euros bailout to Portugal in May 2011. After that Euro-zone Finance Ministers established a permanent bailout fund called ESMF (European Stability Mechanism Fund) worth 500 billion euros in February which exposed the extent of crisis to the entire globe. Following months saw continued fund flowing into Eurozone with 78 billion euro bailout for Portugal, 109 billion euro package for Greece, 50 billion euro austerity budget passed by Italian government, 8 billion euro tranche for Greece from euro-zone finance ministers. These periods were the worst times for markets across the globe with debt rating cuts from S&P on Italy & France and prediction from European Commission that economy will contract by 0.3% in 2012. By this time, markets have discounted all negative news and were set for rebound on assurances made by Euro-zone ministers and is still going on expectation rather than reality. Euro-zone economy which accounts more than that of US and China is a matter of concern for all investors across the globe. It is still doubtful whether economy will come back to growth trajectory with expectations matching with reality. This is the time where investors will time the market on whether these policies and actions taken by Euro-zone officials have been effective or not. Markets which over-reacted for the last few weeks would likely to take a pause before the next move due to technical and fundamental rationale. Technical speak to be extremely overbought on charts of Indices and are imminent for a fall if Fundamentals are not matching with expected revival in economies as ensured by major Central Banks. Earnings season and US Presidential election may cause volatile session for the market with profit booking likely to seen before US election and Q3 earnings. As there are no major surprise expectations from major Central Banks, we can expect profit booking which is highly likely in coming days. Gold which was the favorite of investors in testing time saw buying spree on dollar losing its value last weeks is also in the overbought condition. Any rise in dollar will cause traders and investors to unwind their long positions in Gold. Gold has major resistance at 1800 levels, whereas support for the yellow metal is at 1720 and 1692. Below 1692, it can test 1650 and 1630 levels. Crude which rose on speculative buying since June 2012 started its fall last week due to concerns in world economies, which is a sign that investors confidence on economic strength starts loosing once again in the midst of renewed economic stimulus packages. However, Middle East tensions between Iran and Israel triggers buying at lower levels after the steep fall last week.

About MEX Nepal Mercantile exchange of Nepal MEX Nepal is a leading ISO 9001:2008 (URS, UK) Certified Mercantile Exchange having wide range of trade participants across Nepal trading in Futures. We offer Future trading across all major commodities including Precious & Industrial Metals, Energy, Food Grains, Fibre Crops and Soft commodities. We offer both types of settlement Physical and Cash, with excellent Market model functionalities having wide array of Order systems. Robust Delivery mechanism, globally trusted accounting and Compliance procedures, Transparent and rule-based dispute settlement makes MEXNepal, one of the best mercantile exchanges around the world. We offer Institutional Non-Clearing Memberships using transparent Clearing model and world-class technology.

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