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Optimistic February, Watch out for March
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I see a optimistic February in stock market except energy concerns.However in March, political tensions might increase. There's a degree of discomfort among investors who feel markets are too good to be true.If and when the stampede happens, it could be exacerbated by this feeling.
Stock markets have become inured to terror attacks and war, but when growth slows and investors turn queasy about risk, shares may prove more vulnerable to shocks such as a conflict between the United States and Iran.
World equity markets, which set successive multi-year highs through January, have been dominated by continually upbeat readings on the global economy.
But if the underlying strong momentum in global economic activity wanes this year and next, as many economists expect, then the outbreak of fighting in Iran, for example, could be the catalyst for a major selloff.
The United States has dispatched an extra aircraft carrier strike group to the Gulf, turning the heat on Iran which was placed by President George W. Bush among the "axis of evil".
Even though analysts think an imminent attack is unlikely, if it does come down to war, a prolonged conflict is seen, leading to a spiral in the price of oil, a stock market slide and possible interest rate cuts.
If Iran was attacked, oil would go through the roof. People would see oil as a growth dampener rather than an inflation trigger and government bonds will be a good place to be.
The emergence of China and other developing economies as huge consumers of oil could also exaggerate the impact of a disruption in crude supplies on the price of oil, now hovering at around $58 a barrel.
Oil spiked briefly during the Kuwait conflict more than 15 years ago and analysts say the rise this time could be even sharper given global demand.
Vague talk of an incident involving the United States and Iran in the Persian Gulf in the middle of January rippled briefly through forex markets.
Stock markets enjoyed a bull run through much of 2006, driven by strong economic growth, buoyant corporate earnings and an upsurge in mergers and acquisitions. Little heed was paid to Iran, or indeed, terror attacks.
MSCI's flagship all-country index <.MSCIWD> rose nearly 19 percent last year and hit a record high on Thursday, but analysts expect a slowdown this year.
Issues of geopolitical risk inevitably do not get factored in.
The Chicago Board Options Exchange Volatility Index or VIX <.VIX>, Wall Street's "fear index", trades around 10, compared with a peak of around 50 in September 2001 after the aircraft attacks on the World Trade Center and the Pentagon.
While the Iran situation is one of the top political concerns, other trouble spots could be North Korea, Iraq, Israel and China -- whether linked with Taiwan, Mongolia or Nepal. And any rise in the cost of borrowing could hit emerging markets before feeding through elsewhere. |
| Tarih
: 05.02.2007 |
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Copyright
© 2006 Mert TOKER All Rights Reserved. |
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