Monday 3 December 2007

Decline in global stocks led by China, rate cuts seen increasingly likely

November was somewhat unusual in that China's stock market was among the world's worst performers according to the Morgan Stanley Capital International indices.

 Local currency
(percent)
US dollars
(percent)
USA-4.44-4.44
Japan-5.56-1.85
UK-4.71-5.68
Germany-2.66-1.24
China-13.20-13.59

Of course, stock markets all over the world did poorly in November. However, things started looking up for stock markets in the last week of November on expectations for more rate cuts by the Fed. In his latest analysis, Tim Duy says the expectation is justified based on the latest remarks by top Fed officials.

However, before we get to the next Fed meeting next week, the ECB and the BoE give us their latest interest rate decisions this Thursday. Both are expected to leave rates unchanged but calls for the BoE to cut rates are growing. Even for the ECB, the next move is now seen as a rate cut.

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