Global stocks close out volatile week mixed
Sunday, 22 March 2009
LONDON, Mar 20 (AFP): Global stock markets were mixed on Friday as investors tried to get a fix on what comes next after the latest efforts, including a trillion dollar US programme, to tame the global economic slump.
Dealers said that after recent gains, investors have been looking for confirmation this week that the worst was over, that the economy is finally touching bottom and that it will recover eventually.
Some data has been slightly better than expected to support some modest hope but most headlines, such as a record fall Friday in eurozone industrial output for January, remained bad and fuelled caution.
At the same time, the welcome for the biggest lead of the week -- the US Federal Reserve's move to inject another trillion dollars into the financial system -- faded as investors assessed the risks to inflation and the dollar.
For the Economist Intelligence Unit, "the world economy is at grave risk of entering a depression," with a 30 per cent chance as opposed to a 60 per cent chance that all current stimulus measures will eventually work.
"A third scenario, in which failing confidence in the US economy leads to mass withdrawal from dollar-denominated assets and a collapse in the US currency, carries a 10 per cent probability," it said in a report.
Against this uncertain backdrop, dealers said investors were clearly hesitant to make major new commitments to the market, preferring to wait and see what next week brings.
On Wall Street, the Dow Jones Industrial Average was down 0.40 per cent at around 1700 GMT, having traded in a narrow range.
The markets rallied strongly on Wednesday after the Fed's surprise announcement it would buy up to 300 billion dollars in Treasury bonds and an additional 850 billion in other debt in a bid to bring down lending costs and so get the economy moving again.
On Thursday, however, investors took profits amid concerns the Fed move carries a huge inflation risk and might have been a last ditch measure after it has cut interest rates, its traditional policy tool, to virtually zero.
"The week draws to a close with the market still digesting the Fed's decision to buy US Treasuries and become a convert to full blown quantitative, rather than just credit easing," said Calyon analyst Stuart Bennett.
CMC Markets dealer Matt Buckland warned that the Fed plan was unsettling investors because it could spark inflationary pressures in the United States.
"The move... by the Fed is certainly unnerving many, not least because the popular opinion is to see this as a path to increased inflationary pressures," Buckland said.
In Europe, London's FTSE 100 index of leading shares closed up 0.68 per cent to 3,842.85 points. In Paris, the CAC 40 gained 0.51 per cent to 2,791.14 points and in Frankfurt the DAX added 0.63 per cent to 4,068.74 points.
Dealers said that after recent gains, investors have been looking for confirmation this week that the worst was over, that the economy is finally touching bottom and that it will recover eventually.
Some data has been slightly better than expected to support some modest hope but most headlines, such as a record fall Friday in eurozone industrial output for January, remained bad and fuelled caution.
At the same time, the welcome for the biggest lead of the week -- the US Federal Reserve's move to inject another trillion dollars into the financial system -- faded as investors assessed the risks to inflation and the dollar.
For the Economist Intelligence Unit, "the world economy is at grave risk of entering a depression," with a 30 per cent chance as opposed to a 60 per cent chance that all current stimulus measures will eventually work.
"A third scenario, in which failing confidence in the US economy leads to mass withdrawal from dollar-denominated assets and a collapse in the US currency, carries a 10 per cent probability," it said in a report.
Against this uncertain backdrop, dealers said investors were clearly hesitant to make major new commitments to the market, preferring to wait and see what next week brings.
On Wall Street, the Dow Jones Industrial Average was down 0.40 per cent at around 1700 GMT, having traded in a narrow range.
The markets rallied strongly on Wednesday after the Fed's surprise announcement it would buy up to 300 billion dollars in Treasury bonds and an additional 850 billion in other debt in a bid to bring down lending costs and so get the economy moving again.
On Thursday, however, investors took profits amid concerns the Fed move carries a huge inflation risk and might have been a last ditch measure after it has cut interest rates, its traditional policy tool, to virtually zero.
"The week draws to a close with the market still digesting the Fed's decision to buy US Treasuries and become a convert to full blown quantitative, rather than just credit easing," said Calyon analyst Stuart Bennett.
CMC Markets dealer Matt Buckland warned that the Fed plan was unsettling investors because it could spark inflationary pressures in the United States.
"The move... by the Fed is certainly unnerving many, not least because the popular opinion is to see this as a path to increased inflationary pressures," Buckland said.
In Europe, London's FTSE 100 index of leading shares closed up 0.68 per cent to 3,842.85 points. In Paris, the CAC 40 gained 0.51 per cent to 2,791.14 points and in Frankfurt the DAX added 0.63 per cent to 4,068.74 points.