World Economic Parameter
There is flair of discussion at top levels of each countries on how to tackle inflation, especially food inflation. The rising commodity price hit most Emerging Market and pose a threat to developed markets. Food inflation and industrial metals are recording higher level every week. Gold is, at present, doubtful. Thus food grains, industrial metals and energy (Oil) is expected to show their strength in coming days.
Euro Zone countries especially PIIGS issues remain unresolved, even if their bailout / adjustment hopes rises. Euro zone has not tabled any convincing policy which is a disappointment. By lack of any convincing policy, the euro will weaken further vis-à-vis strengthens USD. Under the current circumstance, it seems that economy of US is getting a good base and the growth will emerge in US. The emerging market currencies in the short run seems good to go long. Credit markets in Europe are continuing to show dysfunction and that current conditions signal widespread defaults, restructuring and other sovereign and corporate event risks.
Under the rising interest rate scenario, we should stay long on corporate bonds of emerging markets along with a hedging position on interest rate risk. However, no prospect is expected on European bond. American credit rating seems strengthening.
Political issue in Egypt has contagious effect. Even if it is not taken seriously by world communities by its local nature, but it can hit the world in unexpected ways.
The issue of interest rate has greater impact on stock markets around the world. It is expected euro zone nations (in order to save euro) and UK will go for rate hike and US may continue the same rate in short term. It is easy to assume to be overweight on US equity and the radar will be on energy and commodities sector. Whereas as in emerging market, fear of rate hike will deter the sentiment as well as be heavy on corporate balance sheet due to interest burden, apart from eventual foreign currency revaluation.