Traders tell me stock markets are down in Europe today over fears about how its world class exporters could be hit by rising oil prices, specifically in emerging markets.
Check out the German exporters, including BMW, Daimler, Volkswagen, Siemens and Adidas. Security fears over Bahrain and Saudi Arabia only added to the realization that higher crude prices may be here to stay and that for these big plays, higher production costs will reduce profit margins.
More importantly, traders noted data in China and India overnight, proving, perhaps, how interest rates hikes from central banks in emerging markets. They were instigated to fight local commodity inflation and now they are slowing demand.
Take a look at the world's giant mining stocks, such as Rio Tinto, BHP Billiton, Xstrata and Anglo American. London hedge funds are booking profits on what have been great momentum plays.
And, on the streets of Greece today, 100,000 protestors marched on Parliament, some clashing with police. The demostrators are angry at austerity programs enacted by the government. But this shows how the focus of markets has switched in one year.
Despite the unrest, traders continue to send the Euro up against the dollar, because members of the ECB are talking about raising interest rates, and may comment on an exit strategy at tomorrow's ECB news conference.
The sterling is also higher against the dollar, after a third member of the Bank of England voted to raise rates earlier this month. Everywhere in the world, there is talk about higher interest rates, except in the U.S.
That's why, as parts of the Middle East implode, there is no safe haven bid on the Greenback.
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