This is a bloodbath of biblical proportions if you look at what has been happening to the Asian markets. While the PSEi is down 1.39%, Shanghai Composite is down 2.60%, Hang Seng down 2.11%, Nikkei down 1.78%, Jakarta down 1.33%, Singapore down 1.68%, KOSPI down 1.76%, Taiwan down 1.87. Europe is also opening with varying degrees of sell-offs, all these because Maumar Khadafy decide to shoot down Libyan protesters.
The implications get deeper than that since the big picture seems to show a widespread unrest in the Middle East and North Africa which comprise many of the OPEC countries. Oil futures – West Texas Intermediate for March delivery – shot up 7.44% overnight. With inflation arising from agricultural commodities already experiencing extremely large price spikes, the last thing the world needs is a disruption in the flow of OPEC oil which could result in very high fuel prices down the road.
The implication for the market is if much of the world’s liquidity is being used to finance all kinds of commodities, money going into financial assets will be squeezed badly. The initial sentiment looks to me like fuel being poured into inflationary psychology and I think that is bad for the markets. Some had already seen inflation to be the enemy but it is only now that it is starting to look like a formidable task.
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