Thursday, October 2, 2014

Emerging Markets Are Submerging Again (excerpt)

The strength in the Emerging Markets MSCI stock price index since early February has been somewhat surprising. That’s mostly because the EM MSCI tends to be highly correlated with the CRB raw industrials spot price index, which has been weakening since it peaked this year on April 24.

In recent days, the correlation has come back with a vengeance as the stock index has plunged 8.7% since September 3. There may be more trouble ahead given the close correlation between the EM MSCI and the inverse of the trade-weighted dollar. Why is this happening all of a sudden? It looks like another Fed tightening tantrum may be underway. If so, then the confidence that Fed officials have had in their ability to normalize US monetary policy without destabilizing the global financial system may get shaken.

Today's Morning Briefing: October Feast or Famine? (1) Aging vs. maturing bull. (2) Bull killers. (3) Bull stumbled during September, tripped yesterday. (4) This may be the month for fasting rather than feasting. (5) Four main issues to worry about. (6) Could a tiny rate hike unglue illiquid bond markets? (7) Record bond issuance by corporations in US and Europe. (8) Blackrock sounds the alarm. (9) Central bankers’ credibility on the line. (10) Are Eurozone and Japan exporting their weak economic performances to US? (11) Focus on market-weight-rated S&P 500 Auto industries. (More for subscribers.)

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