Is the crisis not over?

Is the crisis not over?
5 (100%) 6 votes

The optimism of the global investors lasted only a few months. This week, to concerns about the global economy returned to the markets once again. Now, optimism is not enough for market participants, for positive attitudes they need economic data, confirming the end of the recession and early recovery of world economy, transmits Reuters.

However, until now there is nothing to please them with. At the beginning of the week the World Bank (WB) published another negative forecast that the world economy will decline to 2.9 per cent this year. This projection finally frustrated investors and caused a sharp decline in world stock and commodity markets.

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Meanwhile, just a few weeks ago, the investors and market participants were almost full of happiness. The American market had grown by about 40 per cent for the past few months, as investors had believed in the ending of the crisis and the imminent recovery of the global economy. However, the forecast WB deprived the investors of their dreams for happiness, and earlier this week the U.S. stock market closed with the biggest loss over the past two months, and the index S & P 500 dropped below the levels at which it concluded the last year.

The U.S. dollar managed to win back its losses slightly against the backdrop of heightened optimism; and the U.S. currency quotes grow each time the world market shares fall. “At the moment, all allegations of an early restoration of the world economy seem to be at least debatable. The market feels uncomfortable and this discomfort is reflected in the value of the shares”, – said Citigroup analyst Shiyam Devani.

In her turn, Tullett Prebon economist Lena Komileva believes that the recent rally in commodity and stock markets was due not just because of the positive economic statistics. According to her, after the gradual stabilization of the global economy, investors finally freely sighed and began to buy up shares of companies and commodity assets this spring . “But we should not forget that the stabilization and recovery are not synonymous. Until the financial markets get out of the crisis, it is not worth waiting for the restoration of the world economy ,” – adds the expert.

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This assertion is difficult to be disagreed with. All the actions taken by the world’s Central Bank to exit the crisis has not yet yielded virtually any results. Moreover, as the head of Johnson-Illington Advisors, Hugh Johnson pointed correctly, consumers sell all that they can and reduce their spendings instead of increasing it. “It is hard to imagine the economic recovery in such circumstances”, – added the analyst. He estimated that the growth in the American economy could only begin by this year’s end, and that it would be extremely weak. “I think the world’s equity markets will adjust even at least by 5-15 per cent”,- he said.

It seems that this point of view is shared by the leading specialist for Harris Private Bank Investment Jack Ablin. According to him, the recent stock market rally was just another correction, and now “everything has returned to its own place.” Indeed, the investors are not too pleased with the statistics: unemployment in the United States is at the level of 26-year peak, while European banks, according to ECB estimates, will write off at least 283 billion U.S. dollars this year.

Strategists the French bank BNP Paribas believe that in order to return the confidence of the investors of the FED, which carries out the functions of the Central Bank of the United States, it should be understood that discount rates will remain unchanged in the nearest future. However, it should be noted that the lower refinancing rate will not have the best impact on the U.S. currency and may even eventually trigger a sharp rise in inflation. “In any case, the U.S. legislators will have to decide what is more important – economic growth or astable dollar,” – concluded the leading market analyst of FX Solutions Jozeph Trevizani.