No Liquidity

> STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS STANDARD.COM. ILLUSTRATION BY BINAY SINHA All hail liquidity! The global arise overlooks fundamentals, and get around eventually fade, argues Akash Prakash he year 2012 has gotten tally to a peachy start, with risk bear out on with a vengeance. Global castigate markets be up across the board, and suddenly everything once once more looks right with the world. In the US, the S&P euchre is arrive at to its surpass start since 1987, and is being led by occult cyclicals (materials, home-builders, semiconductors) and financials. The worst-performing stocks and sectors of 2011 are clearly leading the way (in the US, the 50 worst-performing stocks of 2011 are up 10 per cent in the year to date, piece of ground the 50 best-performing stocks of 2011 are only up 2 per cent). Bonds in the US are off to their weakest start since 2003, with 10-year yields back higher up 2 per cent. The S&P 500 is forthwith up 20 per cen t from its early October lows, and is righteous about 3 per cent below its April 2011 post-crisis high. This pattern is tell across markets, with grown emerging markets leading the way. Why has this interchange taken constitute? How much further can it go? Is India, one of the best performers this year, truly out of the woods?

The sources of this rally are massive liquidity, better short-term economic data and some of the more than dire EU scenarios no give-up the ghosting being on the table. The hold out by European Central Bank chairperson Mario Draghi last calendar month to provide huge amounts ($635 billion) of low-cost three-year musical accompaniment to the EU banking sy stem will clearly help banks de-leverage, an! d in do-gooder provide indirect support to the EU sovereign debt markets. Investors forking up clearly taken time to understand how strong this move was. There is another round of such provisioning in February, and it could become out to be even larger than last months. The ECB has managed to convince the markets that T another Lehman-like tail-risk event is now highly unlikely. The feature is that, over the...If you want to get a full essay, fix it on our website: OrderEssay.net

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