U.S. Federal Reserve Chief Ben Bernanke set off a virtual tsunami in global financial markets on Thursday after he hinted that the American central bank could start winding down its massive stimulus programme this year.
While stock markets, including India, crash landed, commodities, currencies and shares tumbled to unwanted milestones.
International gold prices slumped to a near three-year low and a sharp sell-off overnight on Wall Street led to an almost domino effect — with markets in Asia and Europe falling in turn.
The rupee slumped to a record low of 59.98. The ballooning current account deficit made the rupee more vulnerable in the fast evolving global context. Intervention by the Reserve Bank of India, however, helped the currency recover to close at 59.57.
On the multi-commodity exchange (MCX) late Thursday evening, gold was trading at Rs.27, 074 per 10 gram, having fallen by Rs. 937 from the previous close.
Globally, Germany’s stock market index DAX dived by 2.58 per cent, followed by London’s benchmark FTSE 100 index slumping by 2.28 per cent.
Asian stocks outside Japan, on the other hand, suffered their biggest daily loss since late 2011.
Though Mr. Bernanke’s suggestion may have been the spark, industry watchers also pointed to a surprise drop in preliminary data on Chinese manufacturing which also fuelled the fire.
While the news was enough to set the dollar surging, bonds and global currencies took a pounding. Eurozone bonds took a beating across the board while the euro, Phillipine peso and South Korean won were down by 0.5, 1.1 and 1.4 per cent respectively.
Dow Jones down
At the time of going to press, in late morning deals, the Dow Jones industrial average was down 224.82 points, or 1.49 per cent, at 14,887.37. The Standard & Poor’s 500 Index was down 25.32 points, or 1.55 per cent, at 1,603.61.