Behind Global Stock Setback ; Market Turmoil from India to New York Reflects Concern about Inflation and Interest Rates

By Mark Trumbull writer of The Christian Science Monitor | The Christian Science Monitor, May 24, 2006 | Go to article overview

Behind Global Stock Setback ; Market Turmoil from India to New York Reflects Concern about Inflation and Interest Rates


Mark Trumbull writer of The Christian Science Monitor, The Christian Science Monitor


Worries about inflation have made the investing climate suddenly riskier around the world, but a widespread bear market is being kept at bay.

That's because the global economy continues to show solid growth, analysts say. Yet recent stock market turmoil, particularly in hot emerging markets such as India and Brazil, signal an environment that can bring quick penalties for investors.

Emerging markets, soaring for several years as they lured a torrent of global cash, have reversed course the past two weeks. In the US, the Dow Jones Industrial Average began the week down 4 percent from its six-year high of 11,642.65, which the index reached on May 10. European exchanges have also fallen in the past two weeks.

"The markets have woken up to the fact that interest rates are going to go up more than they were expecting - especially in the US," says Nariman Behravesh, chief economist at Global Insight, an economic consulting firm in Lexington, Mass. That, in turn, could mean slower economic growth from Hamburg to Hong Kong.

Although the impact is global, he says, it is magnified in emerging markets such as those in Asia and Latin America. Because they had been the locus of investor enthusiasm, they face the prospect of the sharpest pullback. "It's the emerging markets that are a little dicey."

That pattern was evident Tuesday. Many Asian markets fell further, extending a string of recent losses, while investors found firmer footing in the US and Europe. Exchanges in France, Germany, and Britain all rebounded with gains of more than 2 percent, and shares rose in New York during morning trading.

Commodity prices have joined interest rates as a driving force in recent days. Declines in the price of metals and other raw materials - a possible harbinger of slowing economic growth - pose a particu- lar threat to the resource-based economies of many developing nations.

Tuesday, firmer prices for commodities including oil helped some emerging markets stem their losses.

Although the mood on world markets is more sober, analysts say it's still a long way from a bear market, typically defined as a 20 percent loss of value that can last for a long or short time.

"Emerging markets and the commodities markets will continue to be very volatile" for several months, predicts Michael Cosgrove, who publishes a capital-markets newsletter, The Econoclast, in Dallas. But for long-term investors, he says, the best strategy may be simply to ride out the storm.

"You're probably better off just sticking it out," rather than selling on the hunch that deeper declines may be coming. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Behind Global Stock Setback ; Market Turmoil from India to New York Reflects Concern about Inflation and Interest Rates
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.