From Reuters Asian Markets fall to a nine month low

Asian stocks hit a fresh 9-1/2-month low on Friday while spot gold slipped to its lowest price in nearly three years as the U.S. Federal Reserve's plan to scale back stimulus continued to worry investors.

But China's central bank offered some comfort to stressed money markets, relieving Thursday's crushing liquidity squeeze with "window guidance" to major state banks to resume supplying funds, after indicative interbank rates reached highs above 25 percent on Thursday.

The benchmark weighted-average seven-day bond repurchase rate tumbled 351 basis points to 8.12 percent, and the overnight repo rate fell 378 bps to 7.96 percent.

The two short-term rates hit record highs on Thursday as the central bank again ignored market pressure to inject funds into the market, a move traders and analysts see as an attempt to force banks and other financial institutions to trim non-essential businesses.

Press Conference Mr Gerry Rice, Director,Communications Department IMF

On suggestions to the Fed to taper smoothly their accomodative monetary policy.

I would refer you to our concluding statement on the Article IV Consultation with the United States, which we issued just late last week where we said that the microeconomic benefits of asset purchases continue to outweigh the costs and the Fed should continue its preparations for a gradual and smooth exit. The highly accommodative monetary policy has provided important support to the United States and to global economic recovery. And under our staff growth projections in that Article IV a continuation of large-scale purchases through at least end 2013 is warranted.

Obviously, the Fed has a range of tools to manage the exit from its highly accommodative policy stance. And in our Article IV concluding statement, we highlighted in particular the importance of effective communication and careful calibration of timing to avoid disruptions for the United States and for other countries.

Closing Bond Prices and Yields

			Change
** YIELD     From WSJ
U.S. 3 Month			0/32	0.048
U.S. 2 Year			-1/32	0.339
U.S. 5 Year			-9/32	1.316
U.S. 10 Year			-17/32	2.422
U.S. 30 Year			-1 23/32	3.519
Germany 2 Year			-6/32	0.257
Germany 10 Year			-31/32	1.669
Italy 2 Year			-18/32	2.289
Italy 10 Year			-2 5/32	4.538
Japan 2 Year			0/32	0.130
Japan 10 Year			-7/32	0.842
Spain 2 Year			-9/32	2.261
Spain 10 Year			-2 14/32	4.829
U.K. 2 Year			-3/32	0.500
U.K. 10 Year			-1 10/32	2.295**

Market Indicators on Extreme Fear Territory

Fear and Greed Index    Goes from  Extreme Fear 0 to  Extreme Greed  100

Now Extreme Fear    16        20.06.13

 Indicators

Junk bond Demand                        Neutral

Market Momentum                         Fear

Put and Call Options                      Extreme Fear

Safe Heaven Demand                    Extreme Fear

Market Volatility                           Extreme Fear

Stock Price Breadth                      Extreme Fear

Stock Price Strength                      Extreme Fear

The market Volatility Index  VIX closed at  20.49   with an increase of  23.10% today

New Economic Scenario

 Fed Chairman statement, after the FOMC meeting, that the  economy is in a better shape,confirms what the markets had been anticipated lately, that the Federal Reserve will start to scale back its bond purchasing program

  Mr Bernanke hinted yesterday that the Fed might finish its quantitative program by mid-2014.
Because of the short term production overcapacity, high unemployment and low inflation and the policy of back to normalcy on  interest rates in the US and  a softer Chinese economy. We would expect
lower commodity prices, lower local  currencies and bond prices in emerging countries and developing countries.
   Before the carry trade was to change US$ dollars to local currencies in emerging countries, and take advantage of their higher interest rates, plus the local currency appreciation  that was the norm in the previous scenario.
  Now the new scenario, as far as there is no change in policies towards return to normalcy in interest
rates, means a flight to quality, the safe haven is now the US dollar,that means  the return of hegde funds from emerging and developing countries, to the US which is having a slow recovery, that could
get better later in the year and even more in 2014 as the IMF suggests.

Market Rout on the price of Commodities

Commodities market meltdown, after Federal Reserve Chairman said yesterday that they could tap
their 85 billion bond market purchases later this year.

ETF      Commodity      Price            

GLD      Gold                125.17         -4.18%

SLV       Silver                 19.28         -6.41%

JJC         Copper              37.71        -2.38%

PPLT    Platinum          135.36          -2.63%

REMX  Rare Earth           9.81          -3.25%

British Banks Still Undercapitalized

Britain’s banks have plans to raise nearly £14 billion by the end of the year to plug a black hole in their balance sheets, the regulator said today.

The Prudential Regulation Authority said that the aggregate

 capital shortfall at British banks at the end of last year was

£27.1 billion, higher than the £25 billion estimate in March.

''Britain's banks still have too little capital'', Mr. King said. 

"There is clearly some way to go before we can claim to have a really well-capitalized banking system."

Mr. King said the global economy remains plagued by economic imbalances and warned recovery is likely to be "a bumpy ride."

He ''urged bankers and policy makers not to forget the lessons of the crisis and to press on with reforms''.

"We cannot be complacent. As the memories of the crisis fade, and those who saw it at firsthand retire, it is vital that the 'audacity of pessimism' is not lost," Mr. King said.