Fears of more tightening and debt concerns (ISFM) (17-01-2011)

Various concerns were driving markets today as monetary policy in China and ongoing debt fears in Europe were causing jitters and sell-offs among investors. Wall Street is closed today for Martin Luther King Day.

In Asia, the losses were led by Chinese shares, which fell as concerns that Beijing may use monetary policy tools to restrict bank lending triggered a sell-off in real estate and financial stocks. The drop in the region came after the People’s Bank of China Friday raised banks’ required reserve ratio for the seventh time since the beginning of 2009, by half a percentage point.

In Europe, investors remained nervous as finance ministers prepared for a meeting to discuss the sovereign-debt crisis, though the Spanish market came under selling pressure. Contributing to the uncertainty was speculation as to whether Germany would support an increase in the effective lending capacity of the bailout fund, and the euro came under pressure as market participants were eying the meeting, which is expected to be dominated it. Worries about inflation in China and Europe are adding to the pressure on bank stocks, as caution reigns supreme.

The euro traded at $1.3335, down 0.3 percent on the day after falling to as low as $1.3243 on trading platform EBS. Traders said decent buying by Irish banks helped the euro recover from those lows.

Wall Street will be closed today, but it will be interesting to see how it reacts tomorrow to the news that Apple Inc.'s Chief Executive Steve Jobs announced he is taking a medical leave of absence to focus on his health, although he will continue as CEO and be involved in major strategic decisions.

Source: ISFM