Equities Took Rest While Commodities Shine

Last week saw emerging market Equities taking a breather after a steep rise from August month lows, while commodities like Gold and Crude Oil scaled new highs. It will be worthwhile that emerging market equities take some consolidation before they start upword march again, it seems stock markets want to see what the US federal reserve does on the interest rate front on October 30. This will be crucial factor in deciding ongoing sharp rally in emerging markets. Also with Japanese central bank deciding to hold rates at 0.5%, implying that deflation might re-surface in the absence of any solid economic growth on consistance basis, money from japanese investors will now look for growth which is happening outside their country, especially in India, China, Taiwan, HongKong, Russia. Having said that, emerging economies will be the key beneficiaries of this huge money flow.

Consolidation

Equity markets across the world are consolidating gains they have made in the past few trading sessions with european,U.S.,asian markets displaying subdued trading sessions.
Market players will also be keenly waiting for U.S.Fed decision on rate cuts this september. Any rate cut will give further boost to emerging markets. Dollar has been under pressure against the yen and euro for the past few days with market players now wanting to buy riskier assets like stocks and dump dollar. Noise levels from U.S. sub-prime mortgage markets has been waining and is a welcome sign.

Japanese Central Bank Keeps Rates Unchanged

Today japanese central bank kept the interest rate unchanged at 0.5%. That's good news from yen carry trade perspective. Yen is trading at 116.27 against the U.S.Dollar and thus fear of dollar falling further against the yen is well contained at the moment. Equities are consolidating across the world after sharp sell off, commodities like copper, alumunium, lead, nickel, zinc, crude oil are also cooling. This is good news from inflation perspective but also raises the concerns about slowing economic growth in the developed world.

Not all money is credit

Markets have been bearing the brunt of mahem in the U.S. sub-prime mortgage with several U.S., Europeon and U.K. funds going burst.
Investors and traders believe that all markets have risen because of cheap credit pouring in the markets, however this is paritally true as people do have their own money to invest in case oppurtunity arises, because if all was borrowed money then markets for the past few trading sessions would not have been found the support of new buyers!

Smart buyers have been utilising this sharp fall in equities as a buying oppurtunity and are putting their own money.

Excessive borrowed money can only inflate the valuations of given assets to artificial levels but any cracks in that credit cycle can turn that tide against the borrower as he has to return the money to original lender and he does that in panic as we have seen for the past few weeks. Therefore investng with own money is the only rational strategy one must adopt.