J P Flemming reports that there has been a continued decline in the US economy this week, affecting ...
J P Flemming reports that there has been a continued decline in the US economy this week, affecting other markets now reliant on its activity.
Wall street indices continued to fall, Dow Jones fell to its lowest in eight months to 2.3% and NASDAQ declined by 4.3% its lowest since the terrorist attacks on the world trade centre in September.
However the economy has showed some positive signs, there remains to be strong housing prices, the fast food chain McDonalds has been upgraded and software producer Oracle done better than expected.
Much of the tame inflation data confirmed market beliefs that interest rates will remain on hold, but there are some worries from analysts that technology, such as mobile phones, will not produce the long-term growth that has been expected.
The sluggish movements in Wall Street have effected activities in the European stock markets, although the decline has been less severe.
The UK's FTSE 100 was the least affected by falling 0.5%, the French CAC 40 was down 1.1% and the German DAX was 1.7% lower.
The most effected European market was the Swiss SPI General which fell by 3.0%, their losses are also due to Swiss banks weakening with the fear of attacks from EU banking secrecy.
France had their biggest drop in consumer spending for three years, the economic data has not improved consumer confidence in Italy with sales reaching a two-year low in May.
In the same month the UK retail sales were also lower and inflation fell to 1.8%, now the Bank of England will not be under so much pressure to raise interest rates.
European equities have remained difficult to support from Wall Street and the recent strength of the Euro against the dollar has meant that Euro-zones corporate earning growth have been threatened, but the European Central Bank will be relieved that there are no longer inflationary pressures because of its resurgence.
In the Pacific indices have experienced further declines due to the US stock market showing no signs of recovery and the impact it has had on export demands.
It was a painful week for investors in Japan, as concerns over the situation of the US economic situation grew the TOPIX went down by 4.9%.
The defensive sectors were, as expected, the best performers especially in utilities, pharmaceuticals and food producers but short-term investment indicates the TOPIX direction will depend on how investors view the US economic and corporate outlook and whether they think the situation will improve.
Technology profit warnings from the US has had a negative impact with regions, the news was certainly not welcomed by Korea, whose KOSPI index fell 5.4% as labour unrest at Hyundai motors hit it hard.
The Taiwan stock market wasn't as badly affected the TSWI fell by 1.9%, Singapore's Straits Times index fell by 4.8%, Hong Kong's Hong Seng declined by 3.7% and Australia's All Ordinaries by the end of the week had fallen by 1.3% it is now at its lowest since November 2001.
The US and IMF ruling out financial aid affected the South American markets.
Brazil's index was affected by the popularity of Lula the left-wing candidate in the coming election, he is calling for Brazil's debt to be renegotiated causing plummeting and bond yields to soar.
The BROVESPA had a sharp fall of 11.2% which had an effect on Mexico's index, the IPC was down 3.2%.
Argentina were the only ones to gain this week, the weakening of the peso sparked investments into the safety of the General index as it increased by 6%.
In Eastern European emerging markets also experienced declines as a result of Wall Street.
In Hungary the government's decision to increase fuel duties hit the energy group Mol hard and sent the BUX down 4%, despite recording GDP growth Poland's Wig was down 0.7% and the Czech. Republic index hit its lowest in two years, but the re-election of the Social Democrats offered some support as PX50 fell 1.3%.
The health concerns of the Prime Minister in Turkey forced IMKD1000 down 2.6% and the weakness in Russia's oil sector pushed the RTS 7.7% lower.
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