Moneycontrol Pro Panorama | Rising market stress points to vulnerability, investors should pay close attention

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Consider these global developments through the post-COVID recovery phase. A strong greenback, a rising dollar index, a sharp spike in US 10-year bond yield, an unexpected rise in UK government spends to prop a faltering economy, tumbling crude oil prices, surge in natural gas prices, wild swings in commodity prices and rising borrowing costs. To say that global financial risks are mounting would be an understatement.

As if these aren’t enough, last Europe’s prominent bank Credit Suisse sent shock waves as credit default swaps shot up. Some of the big risky bets taken by the bank failed, leading to investors losing money and trust. Is the bank on the brink of a potential collapse? If so, are we staring at a Lehman-like moment? What will be the consequences for financial markets that are already roiled with adversities?

Investors’ hope is that bank’s size and importance of the problem are not comparable with the magnitude of the Lehman crisis. However, fragile markets, as is the case now, can cause exaggerated reactions, says Ajay Bagga in this article.

An article from the Financial Times (free to read for MCPro subscribers) puts forth views from global market strategists that reiterate how big swings across asset markets are raising the risk of a financial accident. Among other things, it highlights that indices of global banks that measure risks and stress in credit markets, are elevated.

Fuelling fears further is the unexpected move by the OPEC+ to sharply cut oil production for November, curbing supply in an already tight energy market. Therefore, along with natural gas, high crude oil prices is likely to keep energy inflation higher, says Shishir Asthana in this article.

At this point, while one can detail risks in the financial markets, it's hard to tell what the outcome would be and who would bear the brunt. …"Someone will get hurt,” says Charlie McElligott, a strategist at Nomura pointing out that the markets are in the accident stage.

Investing insights from our research team

SCIL: This MNC-backed agrochemical player has huge growth potential

GCPL | FMCG earnings update: Operating profitability to recover in H2FY23

Delhivery: Moderating growth clouds near-term outlook

Economic Recovery Tracker

Economic Recovery Tracker | Unemployment goes up, but festival season lights up auto sales

What else are we reading?

Credit growth brings cheer but deposits are not playing ball

Currency markets | Let the droopy rupee be

China’s strategic moves in the Middle East call for India’s attention

Technical Picks: IndusInd Bank, Asian Paints, Zydus, Ujjivan Financial and USD-INR (These are published every trading day before markets open and can be read on the app).

Vatsala KamatMoneycontrol Pro