More Volatility In The Stock Markets

By: Mike Campbell
If anybody imagines that the transition from recession to growth would be a smooth one, they are going to be disappointed. Yesterday’s market figures from Europe amplified this point forcibly. The FTSE shed 2.3% of its value with the CAC 40 in Paris down by 2.14% and Frankfurt’s Dax lost 2.46%. The declines came on the back of less than stellar company performance data for Q3 in Europe and uninspired economic data emerging from America.

Of course, the market levels reflect the average value of all of the shares that a given market trades, so there were some big losses hidden in the details. The Prudential, in the UK, reported a Q3 sales decline of 22% for its financial services; Prudential shares fell 9.8% in London yesterday. Major German software company, SAP, shed 7.7% upon the news that it was reducing its sales forecast Mining stocks were also significantly lower on the basis of doubts about the strength (or otherwise) of the global recovery; Xstrata was down by 9.4%, Kazakhmys fell 9.1% and Lonmin shed 8.4% of its value. If the recession is still driving down economic activity, there will be reduced demand for raw materials – hence the falls in the mining sector.

The gloom spread to the USA with the Dow down by 1.2% on the news that September new home sales had fallen unexpectedly. Trading was somewhat muted ahead of the release of official Q3 growth figures later today. Those figures are expected to show that the world’s largest economy has come out of recession. If it has done so, it will be in no small measure to the government stimulus packages that have been put in place. Of course, these measures cn only have a finite lifetime.

Losses in the far east, yesterday, were less significant; the Nikkei shed 1.4% and in the Hang Seng fell 1.8%.

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