Opinion
Mint Quick Edit | Manic Monday: From Bangladesh to markets
Summary
- This week got off to a turbulent start, with Bangladesh PM Sheikh Hasina having fled the country and stock markets shaken across the world by fears of a US recession, even as Japan’s Nikkei was hit hard by a rapid unwinding of the yen carry trade. The big question: Will the US Fed respond?
This week got off to a turbulent start. The subcontinent was agog with news of Bangladesh’s Prime Minister Sheikh Hasina having fled the country amid unrest against her rule, and investors across the world were left agape at stock-market tickers going deep red.
Just last week, the Federal Reserve seemed confident about the US economy chugging along well, which led it to steer clear of a pivot to policy easing. Since the Fed’s decision, however, the US purchasing managers’ index for manufacturing has shown a contraction, unemployment has turned out worse than expected, and tensions in West Asia have threatened to flare up.
Also read: Mint Explainer: Why India needs to have a wary eye on the Bangladesh coup
Fears that the inflation-focused US Fed may have held its policy rate high for too long have hardened, with equity markets in panic mode. Japan’s Nikkei tanked by over 12% on Monday amid a broader fall in Asia and Europe.
Although this was partly due to the Bank of Japan hiking rates last week, thus unwinding the yen carry trade, concerns of a global recession caused by a US slump appear to be fast taking hold. Indian indices were hit, too. How the Fed responds to all this turmoil could cue the direction of indices in the near term.
