New Delhi: Two weeks ago when governments and economists across the world were warning against the potential bubble in cryptocurrencies, Peter Garnry, head of the quantitative strategies at Saxo Bank issued a different warning.
Garnry said that global stocks were headed for a correction in the second half of the first quarter. While the head of equity strategy at Saxo Bank didn’t get the exact time period, his alarm bells on the run-up in equity markets were on point.
A correction is defined as a 10 per cent drop from the prior market peak.
Now, Garnry says the declines are likely to be short-lived as United States’ 10-year Treasury yields haven’t reached a worrying level.
“We believe this is a healthy correction in equity markets but also likely short-lived as the higher US 10-year yield is still not in the danger zone,” Garnry said in an e-mail, adding, “That area is more likely in the 3.5-4.0 percent range.”
Yesterday was a stark reminder of the ugly 2015 scenario with both equities and bonds lower making only cash a true safe-haven. We maintain our correction call from our Q1 Outlook...— Peter Garnry, CFA (@petergarnry) January 31, 2018
Experts are of the opinion that Wall Street was overdue for a reality check. The Dow Jones industrial average was up over 26 per cent from January 2017 to January 2018, three times the average rise.
Dow was sitting at an all-time high on January 26, just over a week ago. At the moment, the Dow is down 8.5 per cent from that record level.
Indian investors lost around Rs 4.95 lakh crore amid sell-off in the broader market on Tuesday where the benchmark BSE Sensex tumbled 1,275 points or 3.6 per cent in opening trade. Following the downfall, the total market capitalization of BSE listed companies eroded by Rs 4,94,766 crore to Rs 1,43,00,981 crore.
On BSE, 2,221 stocks declined, while 169 advanced and 83 remained unchanged.
Both indices had already been reeling under the Long-Term Capital Gains tax on equity gains of more than Rs 1 lakh since the Budget.
Shares tumbled across Asia after the wild day for US market. Japan's Nikkei 225 index dropped as much as 5.6 per cent in early trading Tuesday. By midday, it was down 5.3 per cent at 21,487.87. Hong Kong's Hang Seng index lost 4.4 per cent to 30,819.25 and Australia's benchmark S&P ASX 200 had skidded 2.9 percent to 5,852.20. South Korea's Kospi declined 2.9 percent to 2,418.79 and the Shanghai Composite index was off 2.2 percent at 3,412.37.
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