Thursday, May 6, 2010

Sovereign Debt" , the new bear mantra

From Athens to Americas global equities continued to tumble, courtesy Sovereign debt troubles in the European region sending Euro to a 13 month low agains the US Dollar. Subject matter experts say this is just the begining of a massive debt crisis in europe and might be as dangerous as a Lehman crisis fall out.

Sovereign debt is the new buzzword doing round in the financial circles. We at Indiabears predicted too early that this crisis cannot be neglected and markets will only take notice after an event.

Thursday morning Asian markets continued to get smashed with Australian and Japanese Nikkei sinking deep in the red.

While D-Street took a beating too over the last 10 days, one should notice that the markets have not shed much blood yet. The front liners are causing the indices to lose weight while midcaps are sitting pretty. One reason for the same can be attributed to the stellar results . But not all midcaps fall in this category. We again advice the real blood shed in midcap space is yet to come. For time being stay away from the space if you are a trader.

We believe UK and US will also be pulled into this bear attack as both the countries soverign debt levels are alarming. Spain and Portugal are nearing a bigger crisis. India on the other hand might witness a fund slow down.

Any hike on the interest rate front in the US might spell death bell to global markets at this point of time. As we mentioned many times earlier "May is coming ,better be ready" is a clear indication of a classic correction. It is too early to figure out whether this leads to the continuation of the bear market which started in October 2007 from US market perepective. Indian markets are out of the bear phase but will likely react to the sentiment.