Investors flee emerging markets, boosting dollar (repatriation of money continues)

LONDON (Reuters) – A flight from emerging market debt and stocks helped push the dollar to a two-year high against major currencies on Thursday as fears built about a global recession.

Investors were also focusing on major company earnings reports, fearful that the worst financial crisis in 80 years and the deteriorating global economy could combine to batter corporate profits.

European shares put in gains on the back of some positive results, but Asian shares fell to four-year lows and emerging markets were again under the gun.

MSCI's main emerging market stock index was down 3.3 percent on the day, hitting a nearly four-year low after major losses on Wednesday.

Emerging market sovereign debt spreads blew out to more than 800 basis points over U.S. Treasury yields, a gap not seen since late 2002.

The cost of insurance against sovereign debt default in countries such as South Korea, Indonesia, the Philippines, Russia and Kazakhstan has soared over the past two days.

"There is now little argument that the world economy will experience a period of sub-par growth, and a recession in several advanced economies looks increasingly likely," Goldman Sachs said in a research note.

I’m going to be thinking about this post all night. There is some serious food for thought here. I need to ponder everything here.

Thanks for the throught-provoking post. All the Freepyannas and Obama conspiracy theorists need to read this post twice and look at the structural problems with the world’s economies and get off the mistaken beliefs that everything is fine and the MSM is just misleading people about the economy to get Obama elected and the economy will bounce back on November 5th.

In spite of what else they say or wht the “experts” say, they are afraid that the fools and idiots in the United States will put Obama and his goons in the White House.

Don't take my word for it for all it matters, but the fact is that the markets are in a situation that cares very little whether Obama or McCain wins. There are VERY REAL issues going on that some section of FReepers are trying to ignore (kind of similar to how some FReepers were ignoring what Ex Texan was saying when he mentioned that the housing market had just become unsustainable). If the market goes down when Hussein gets some % point increases, peole say that it is because the market is afraid of Obambi. If the market goes down when McCain gets some % point increases (McC has gone up, yet the Dow futures right now are looking very scary), then the same people explain that divergence from their prior logic via saying that 'George Soros is manipulating the markets' to get Obama's points up again.

Let me tell you this ...this is beyond simple politics. The level of credit derivatives is more than most people can imagine (we are talking about trillions in nominal amounts, with players not even knowing how counter-parties are exposed, which has the effect of sterilizing liquidity).

Anyways, believe what you will, but even if McCain/Palin went up 80% points, and Obama decided to drop out of the race to go scrounge for his missing birth certificate, and Biden's scalp went super-nova due to all the foreign matter sitting a-top it, the markets wouldn't just say 'hallelujah' and recover!

That is, unless whoever becomes president waves a magic wand and everything gets rebooted in a flurry of pixie dust.

You say that despite what the 'experts' say that the reason the market is acting like this is due to people being afraid that the sheeple will elect Hussein. Well, what are your facts for saying so? Two, what about liquidity sterilization, the huge mass of CDS that are over 50 trillion, the extreme averseness to any counter-party risk? And third, how do you explain when the market goes down when McCain goes up? Or is that due to Soros?

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