This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Central Bank Uncertainty Threatens Emerging Markets

Stocks in this article: DBC EEM

NEW YORK ( TheStreet) -- Commodities markets broadly sold off on Wednesday due to the uncertainty over the course of action in central banks of developed economies.

The Federal Reserve left markets with a dovish tone at its policy decision last week. Since the event Fed board members have come out and hedged their statements by claiming to be hawkish as well, setting their sights on policy tightening before year's end. Ben Bernanke has tried to maintain a balanced approach while figuring out how to rein in the Fed's record high balance sheet. Keeping investors in the dark while being completely transparent looks to be doing the trick.

Similarly, the Bank of Japan rattled markets recently as their commitment to stimulus has been called into question. They too have set out to balloon their central bank's balance sheet in order to elicit growth in investment for their economy. This initially led to the deterioration of the yen's value, but more recently uncertainty over the policies validity has pushed demand back into the currency. If Japan cannot keep its debt to GDP in check then it runs the risk of scaring off investors and pushing the borrowing rate to unsustainable levels.

All of this ties into the fear that the rest of the world suffers with regards to global demand. If major economies are dysfunctional, then the trickle down to emerging economies will have its consequences.

The chart below is of PowerShares DB Commodity Index Tracking (DBC). Commodities have borne the brunt of waning global demand expectations. Countries such as Australia have lowered their cash rate in order to ease the pain of lower commodity prices.

If major economies are not producing enough output and instead clinging onto growth to avoid recessions, demand will not show a sustainable improvement.

Continued uncertainty over monetary policy in major economies will weigh on global asset markets.

On the same note, iShares MSCI Emerging Markets (EEM), which bears a similar price action to that of the commodities chart above, has seen a strong sell off due to similar uncertainty.

Emerging market equities have rolled over slowly after bouncing back from its June lows. The initial reaction to U.S. policy tightening and a stronger dollar was to selloff.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs