Will equities be stable as economic health and the US Dollar drift downwards?
*The Economist, May 17, 2006
Markets wobbled this week, as traders worried about America’s economic health and the dollar continued to drift downwards
“THE American economy is in a nervous state, and the news seems to have trickled through to investors. The Fed statement accompanying last week’s rate hike was more equivocal than investors wanted about the possibility of a June pause in its 16-month rate-raising streak. That rattled markets. The Dow Jones Industrial Average, which had been inching closer to its record high of 11,723, began to slide back down again. On Wednesday, after new data on consumer and producer-price inflation came in higher than expected, the Dow Jones dropped more than 200 points to close at 11,205. The anxiety has spread to markets on the other side of the Atlantic, with London’s FTSE 100, Germany’s DAX and France’s CAC 40 all losing roughly 3% of their value on Wednesday alone.
Commodity markets have also shown recent signs of nerves. They have been soaring in recent months, thanks to the strength of the global economy and, many believe, speculative money from institutional investors. The sharply rising price of inputs such as copper, oil and zinc has been a big part of the inflation worries that are now pressing on equity markets.”
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