Another predicted round of cuts to bond purchases by the U.S. Federal Reserve and plummeting emerging market currencies have left investors fidgeting.
The TSX and the Dow industrials were down 1.23 per cent and 3.52 per cent respectively, last week, as several emerging markets including Turkey, Russia, South Africa and Argentina saw their pressured currencies drop.
Cutbacks on bond purchases by the Fed by $10 billion to $75 billion, which initially flooded emerging markets with money and kept long-term rates low, is said to be the culprit. Anxious about continued scaling back from the Fed, and the impact on other markets and foreign exchange levels, investors have started pulling money out of these emerging markets.
Focus was on China, in particular, as a purchasing managers’ index indicated the country’s manufacturing sector slip over January.
Analysts predict the Fed will continue to cut bank on bond purchases by another $10 billion a month and is expected to make an announcement on Wednesday.
In respect to earnings, Statistics Canada a report to be released this week in expected to show that gross domestic product grew by 0.2 per cent in November with rising manufacturing sales, slightly below the 0.3 per cent GDP growth in October. In the U.S., data to be released this week is expected to show an annualized pace of 3.2 per cent fourth-quarter economic growth, following a 4.1 per cent increase in the last quarter.