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US markets slip on worries over Chinese economy

25 Jun 2013 Evaluate

The US markets ended sharply lower on Monday, following worries over China’s economy and banking system. The market however did manage to pare some of their losses in the afternoon after Federal Reserve officials tried to downplay talk of tapering the central bank’s bond-buying program. Minneapolis Fed President Narayana Kocherlakota stated that the market’s reaction to Fed comments is not yet a concern as long as higher bond yields do not harden over a long period of time. Also, Dallas Fed President Richard Fisher stated that central-bank members fully understood there would be a significant market reaction to last week’s Fed meeting and that big money is organizing itself like feral hogs to test the Fed. Additionally, New York Fed President William Dudley added that Fed has fallen short of its inflation and employment objectives. Dudley stated that Fed policy, while aggressive by historical standards, is not sufficiently accommodative.

On the economy front, the national activity index compiled by the Chicago Fed rose to a negative 0.30 from negative 0.52 in April, while the three-month moving average dropped to negative 0.42 from negative 0.13 in April. The national activity index is a weighted index of 85 different economic indicator designed so that readings of the three-month average below negative 0.70 indicate an increasing chance a recession has started, while readings of zero indicate trend growth.

The Dow Jones Industrial Average lost 139.84 points or 0.94 percent, to close at 14,659.60, S&P 500 slipped by 19.34 points or 1.21 percent, to close at 1,573.09 while Nasdaq dropped 36.49 points or 1.09 percent, to end at 3,320.76.

The Indian ADRs closed in red on Monday, HDFC Bank was down by 1.55%, Infosys was down 0.93%, Tata Motors was down 0.69%, ICICI Bank was down 0.62% and Dr. Reddy’s Lab was down 0.52%.

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