why the share market is going down
The FTSE 100 has posted its since last April, as the London index picked up from a Wall Street sell-off at the end of last week. Indices also fell in Europe and Asia. Here we look at some of the issues raised by the sell-off. Why are stock markets falling? For several weeks, economists and analysts have warned that inflation levels in major economies could increase this year beyond the 2% to 3% that central banks believe is good for developed countries. Official US figures turned those concerns into a sell-off last Friday, after they showed average wage rises in the US. The data increased fears that shop prices would soon rise further, increasing the pressure for high interest rates to calm the economy down. Investors then bolted at the prospect of an era of cheap money Б which encourages consumers and companies to spend Б coming to an end. Over the past month, several members of the US central bank, the Federal Reserve, have argued that three 0. 25% interest rate rises scheduled for this year could become four or five. What is inflation and why does it matter? Is there worse to come? There is every prospect that the US economic data will continue to strengthen, increasing the potential for higher interest rates. President Donald TrumpБs, which gained approval in Congress before Christmas, will inject more than $1tn (бе710bn) into the US economy, much of it in the form of corporation tax cuts. Many firms have pledged to give a slice of the cash to their workers. Decades of flat wages should mean that increases expected in 2018 and possibly 2019 are too small to trigger a reaction from the central bank, but investors are betting rates will rise. As a consequence, stock market jitters could continue. Is it a threat to the global economy?
Many developing world economies have borrowed heavily in dollars and will be stung by the higher cost of servicing their debts. On the other hand, a booming
will suck in imports from those nations, boosting the incomes of the developing world. However, the eurozone looks unlikely to increase interest rates until its recovery is more firmly anchored. That means the euro will continue to rise in value against the dollar, making it harder for European countries to export to the US. What does it mean for the UK economy? A falling stock market should not affect the economy immediately. Its main effect should be to limit the availability of shareholder funds for investment, affecting the long-term health of the economy. But there is a strong feedback loop from falling wealth, such as share portfolios, into lower consumer spending. Shoppers measure their financial well-being in terms of their asset-based wealth as much as their income. As a result, a big fall in share prices could damage the economy. Sensex Opens Flat; TCS Slumps 4. 9% on Block Deal are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0. 30% while the is down 0. 28%. The is trading down by 0. 16%. Meanwhile, The fell on Monday as market participants worried a trade war could develop after President Donald Trump implemented tariffs on steel and aluminium imports. Back home, opened the day on a flat note. The is trading higher by 28 points while the is trading lower by 9 points. The index and index opened the day up by 0. 2% & 0. 1% respectively. Sectoral indices have opened the day on a mixed note with and witnessing maximum buying interest. While, and are trading in red. The rupee is trading at 65. 02 to the. opened the day on a mixed note with & leading the gainers.
In the biggest block trade this year, Tata Sons will sell a 1. 5 % stake in TCS, worth nearly US$1. 3 billion (Rs 85 billion), through the stock exchanges between 13 March and 15 March. Reportedly, Tata Group's telecom business has a debt of over Rs 400 billion even as the sale of the consumer wireless unit to awaits regulatory approvals. Tata Sons announced the sale of the consumer mobile services business to Airtel in October 2017 and had agreed to take care of the unit's debt obligations. Last week, Tata Sons said that it will buy a 7% stake in group company for over Rs 10 billion on or after 13 March, which will increase its stake from 30% to 37% in the hospitality chain. Tata Sons' move to sell over 28 million shares of TCS comes almost 10 months after it received Rs 117. 2 billion by participating in the software major's share buyback programme. After the block deal, Tata Sons will hold about 73% in TCS, which generated US$18 billion in revenues in fiscal 2017. Our team of Equitymaster analysts have been working on a project to in value investing. They have compiled a special report on them, called. Now, because of insights from these interactions, the team has glued their eyes on and bulk and block deals. As per them. "The three approaches - tracking superinvestor shareholdings, catching these moves early through disclosures, and keeping tabs on - have unveiled some critical smart money secrets. " opened the day down by 4. 9%. Moving on to the news from the economy. In the latest development, India's fell to a 4-month low of 4. 44% in February on cheaper food articles and lower cost for fuel. Based on Consumer Price Index (CPI), retail inflation was at 5. 07% in January. In February 2017, however, it was 3. 65%.
It was 4. 88% in November last year. Data released by the Central Statistics Office (CSO) showed that the rate of price rise in the consumer food segment was lower at 3. 26% in February, as against 4. 7% in the previous month. Inflation in vegetables was 17. 57% last month, down from 26. 97% in January, and for fruits it was 4. 8% (as against 6. 24%). Milk and its products too were less expensive with inflation print of 4. 21%, cereals and products at 2. 1%, meat & fish at 3. 31% while for eggs the prices grew at a slower pace of 8. 51%. Retail inflation, measured by Consumer Price Index (CPI) is the main price gauge that the tracks. February's data is an indication that prices are at a safe distance from the apex bank's upper tolerance level of inflation at 6%. Last month, the estimated inflation at 5. 1% in the quarter ended March, including the impact of house rent allowance. It also estimated the retail inflation for 2018-19 in the range of 5. 1-5. 6% during April-September and 4. 5-4. 6% in the second half of the year. The RBI's monetary policy statement is one of the most tracked events in the financial world. With both core and retail inflation easing to new lows, a rate cut in key interest rates was widely expected. The chart below shows how India's inflation and policy rates stand in comparison with other Asian economies. Rate cut or not, we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies. The team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles. For information on how to pick stocks that have the potential to deliver big returns, NSE JR. Nifty
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