5 Things To Know About Selloff In Stock Markets
1. The latest US jobs data, which was released on Friday, has spooked global markets. Better-than-expected jobs data, which showed the strongest annual wage growth since 2009, prompted worries about inflation rising at a faster pace. This has led to possibility that the Federal Reserve - the US central bank - could raise rates at a faster pace than expected this year.
2. Bond yields in the US have spiked to multi-year highs on the possibility of faster-pace-than-expected pace of rate hike in the US and higher inflation, undermining the attraction of equities. "Since last autumn, investors had been betting on the goldilocks economy - solid economic expansion, improving corporate earnings and stable inflation. But the tide seems to have changed," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
3. Back in the domestic markets, the sentiment had also been weak due to imposition of a 10 per cent long-term capital gains tax on equities and concerns over fiscal deficit.
5. There are also concerns that the Reserve Bank of India (RBI) could turn more hawkish on inflation. The central bank is set to conclude its two-day policy meeting tomorrow and is expected to leave rates on hold but could issue stronger warnings about inflation. "We expect the RBI to remain on a pause in this policy. However, the tone will likely be more hawkish with probability of rate hikes in FY2019 increasing," said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.
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