"There was talk about Central Banks, e.g. in Japan, soaking up liquidity. which seemed to hit speculative stocks hard, and rumors of Hedge Funds collapsing. Then in August they bounced back, why I don't know, but I'll take it."
Message 22643775
The talk was a press conference in New York by the central bankers of Japan, EU, and US about jointly fighting inflation by contracting liquidity. BOJ withdrew over $200B, causing panic amongst yen-carry traders, who sold all asset classes, but particularly unwound commodity and emerging market plays. Yen rose with this unwinding (110 per USD in early May), putting further pressure on the carry trade. Now, the carry trade is back, yen is down (117 per USD last week), and so forth. With an election coming in Japan, one suspects that there was political pressure to maintain liquidity rather than risk choking economic expansion. And of course, there is a long history of BOJ acting to maintain exports by cheapening the yen.
When huge sums are withdrawn from speculative traders, there's widespread impact on markets. One could look for issues with low betas, but I suspect that the trend-buckers are news-driven. |
