Skip to comments.Stocks pare losses after factory data
Posted on 03/01/2007 6:49:43 AM PST by dakine
NEW YORK (Reuters) - Stocks dropped on Thursday on renewed inflation worries and as a rise in the yen stirred concern that investors were being forced to unwind carry trades in a repeat of Tuesday's global market rout.
The Dow Jones industrial average (DJI:^DJI - News) was down 195.15 points, or 1.59 percent, at 12,073.48. The Standard & Poor's 500 Index (^SPX - News) was down 21.77 points, or 1.55 percent, at 1,385.05. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 49.33 points, or about 2 percent at 2,366.82.
I just love the way Reuters makes up "reasons" why things happen in the markets. It'll change all day until the MSM comes up with a consensus. They don't have a friggin' clue. My guess is mutual fund sales that were processed at the close of business yesterday.
Love smart folks! That's a yepper. And Hedge funds 2.
Carry Trade: borrowing Yen at a cheap interest rate to buy other stuff (US stocks and bonds typically) that pays a higher interest rate.
If the dollar/yen ratio changes or the interest rates of the borrowed vs bought stuff changes, you might decide to "unwind" the transaction, i.e. sell the stuff you bought and pay off your Yen loan.
I don't see anything in the article about carry trade.
The prices of bonds have been going up.
In order to avoid unnecessary duplication, please do not substitute headlines.
I cut and pasted from Yahoo site; if Yahoo changed it, so be it...
???I didn't see anything there about factory data???
Talk to the person that changed the headline....
uh-huh, ... and not just US notes, tons of the cheap Yen were been leveraged to buy into China too.
and guess what?
The Yen Carry Trade (size unknown but in the trillions)basically unwound with a crash on Wednesday when the Chinese market dynamic shifted.
Shanghai's regulatory environment is changing and that calls for some major re-structuring of every single Asian-centric or emerging market portfolio of every single fund company in existence.
Well, many of those portfolios were leveraged up to the hilt. In previous years, they have funded their purchases in all the Asian stock market, but particularly in China with BORROWED YEN. And why not? Yen was cheap to borrow. It was at 0%, meaning you could literally have borrowed Yen at a market rate of 1%,1.7% TOPS. And us the fund to buy into the Chinese market that made 100% gain last year.
It was fun while it lasted :)