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December 19, 2007

Stockmarket Turmoil to be continued…

The new US inflation data released on Friday have triggered a fresh sell-off in the London stock market, sending stocks lower from Wall Street to Europe and Asia. The Dow Jones Index slipped more than 1.3 per cent lower on Friday, followed by a more than 1.86 per cent fall in the FTSE 100 Index as of yesterday.

I trust that even if you do not fully comprehend the implications of a full-blown recession in the US economy, you have come across the cliché that when US economy sneezes, the rest of the world catches a (rather heavy!) cold… Now, in this occassion, the high US inflation signifies a threat for US policymakers to be caught in an “inflation trap”. Analysts are worried that the accelerating pace of price increases could deter the US Federal Reserve from future interest rate cuts to spur growth, combat distressed financial markets, and ease the pressure on its housing market.

UK Biggest LosersÂ

UK stocks retreated on Monday, as investors worried about inflationary pressures which might force the Federal Reserve to put the breaks on its rate cutting.

The FTSE index fell 119.2 to close at 6277.8.

Home Retail Group (Argos owner) led the fallers with a 6% fall, followed by fashion chain Next, whose price fell almost 5%.

Xstrata tumbled 3.9% and Vedanta Resources slumped 5.2%.

Alliance & Leicester declined 5.3%.

Further stock market turmoils should be expected and not come as a suprise anymore, as the world markets will remain fragile and jumpy for as long as the US economic slowdown continues. Â

2 Responses to “Stockmarket Turmoil to be continued…”

  1. Busydude Says:

    Sounds really scary. Are we to expect an uplift any time soon?

    If not how far can this crisis worsen?

  2. The What Girl Says:

    I suppose your question goes for the UK stock market…

    According to my personal point of view, the FTSE 100 index will resume its upward trend during the coming week, but I seriously doubt it is going to break above 6750 by year end.

    I am not suggesting that we’ve seen the worst yet, as the current moves in the stock markets are ‘corrective’ in nature, but that certainly does not imply the end of the bull market.

    (‘Bull Market’ is a term used for financial markets whose prices are rising)

    My advice – to all investors – is to keep their eyes (and ears!) open for any warning signs of which specific sectors/industries are more likely to be negatively influenced by the current crisis, as happened with the financial sector earlier this year.

    I hope that answers your question.

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