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MUMBAI, Jan 04 (www.GoldTradingCalls.com)– Global Markets led by U.S. stocks dropped, sending the Dow and Standard & Poor’s 500 Index down the most since March, on disappointing earnings, an unexpected increase in jobless claims and growing concern that Greece, Spain and Portugal will struggle to curb their budget deficits.
The Dow average dropped 268.37 points, or 2.6 percent, to 10,002.18 after sliding below 10,000 for the first time since November. The MSCI World Index of equities in 23 developed nations slumped 2.9 percent. All three measures sank to the lowest levels since November.
“People are very nervous about the European debt issues and the U.S. recovery,” said Ryan Bend, a money manager at Federated Investors’ Prudent Bear Fund, which manages about $1.6 billion.
Sovereign Debt Concern
Portugal and Greece led a surge in the cost of insuring sovereign debt from default. The European Central Bank left its benchmark interest rate at 1 percent, a record low, and will probably hold off unwinding any more emergency lending measures on concern about national deficits and rising unemployment.
VIX Surges
The VIX, as the Chicago Board Options Exchange Volatility Index is known, surged 21 percent to 26.08 on demand for protection against further losses. The benchmark index for U.S. stock options measures the cost of using options contracts as insurance against declines in the S&P 500.
Raw-material producers in the S&P 500 fell 3.8 percent collectively as copper, gold and silver prices plunged, while the dollar rallied as investors fled riskier assets.
Tough Road Ahead
The S&P 500 has surged 57 percent since March as governments and central banks globally maintained low interest rates and committed more than $12 trillion to stimulate economic growth.
Global Indices enter Bear Phase
As per the charts, we see the Dow has broken the upward sloping Trend Line confirming substantial correction in the Global Indices. With the recent low being broken yesterday Dow has confirmed that we are in long term Bear Phase. Investors are adviced to book profits and stay away from markets for few month/Qtrs.
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