Emerging markets rattled as anxiety rises

  @CRrileyCNN January 27, 2014: 5:58 AM ET
india currency

India's rupee has weakened in recent days amid concerns about emerging market economies.

HONG KONG (CNNMoney)

Equity markets around the world were battered Monday amid growing volatility in emerging markets.

Asian markets closed sharply lower, with benchmark indices in Tokyo, Hong Kong and Mumbai shedding more than 2% as investors looked to move out of riskier assets. South Korea's KOSPI Index was off by 1.6%. European markets were also slow out of the gate, with broad declines across the continent.

In currency markets, the yen gained ground against the dollar as investors parked their money in traditional safe havens. Emerging market currencies extended losses, building on a trend from last week that hit the Argentinian peso, Turkey's lira and India's rupee especially hard.

Emerging markets have been hammered in recent days due to the possibility that the Federal Reserve, Bank of England and Bank of Japan will pull back on propping up their own economies. Signs of weakness in China's huge manufacturing sector and a looming default in the shadow banking system have only added to worries.

"The fear is that the Fed, Bank of England, and even the Band of Japan will become less dovish more quickly than had been thought even a few weeks ago," said Steven Englander, head of foreign exchange strategy at CitiFX.

Related story: Will stocks break out of their rut?

Developing markets were the prime beneficiaries of low interest rates in the United States, which encouraged a rush of capital into the developing world. Should rates rise and that trend reverse, vulnerable economies could take a hit as their currencies weaken and investors flee.

Related story: Buckle up! 2014 will be a bumpy ride

The Fed will reveal its latest policy decision Wednesday. At its previous meeting, the Fed announced plans to begin scaling back its massive stimulus program by $10 billion per month to $75 billion in monthly bond purchases, citing signs of economic growth.

Even though the economy only added 74,000 jobs in December, many market observers expect the Fed will continue to cut back on its quantitative easing. To top of page



Join the Conversation
Markets
Sponsored by
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 6:28pm ET
Company Price Change % Change
Bank of America Corp... 16.15 0.02 0.12%
Facebook Inc 58.94 -0.78 -1.31%
General Electric Co 26.56 0.44 1.68%
Cisco Systems Inc 23.19 0.16 0.69%
Micron Technology In... 23.91 1.43 6.36%
Data as of 4:01pm ET
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.32%4.26%
15 yr fixed3.36%3.27%
5/1 ARM3.37%3.27%
30 yr refi4.31%4.24%
15 yr refi3.34%3.25%
View rates in your area
 
Find personalized rates:
Rate data provided
by Bankrate.com
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.