INVESTORS SEEK SIGNAL IN THE NOISE Asian markets continued to soar on Friday, on the back of a global rebound on Thursday. The fear was palpable just days ago, but by the end of Thursday, the gloom had dissipated, DealBook’s Peter Eavis reports. The Standard & Poor’s 500-stock index had climbed 6 percent from the low of Tuesday’s closeby the end of Thursday.
The positive trend continued during Asian trading on Friday. Stocks in Shanghai closed up 4.82 percent after another late-day surge, while the Nikkei 225 finished the day up about 3 percent.
Bystanders were left struggling to comprehend the gyrations. Even Wall Street pundits are seeing mixed messages.
At Tuesday’s low, a bear market – when stocks decline 20 percent or more – did not seem out of the question. But after Thursday’s performance, it seemed plausible that the six-year bull market that started in 2009 might resume.
There was, in fact, a string of positive economic data released this week. Spain’s economy is now growing at a rate of over 3 percent, while revised gross domestic product numbers showed that the United States economy grew at a 3.7 percent rate.
There are still plenty of problems that could drag down global growth. China’s leaders have intervened to shore up the stock market, promote bank lending and loosen monetary policy, but these moves could well stifle the role of market forces.
The pressure on emerging markets is unlikely to go away. Companies that have borrowed in dollars may find it harder to pay back debt as their currencies lose value against the dollar. The resulting slow growth in developing countries might squeeze demand for goods and services from the United States and Europe, dampening growth there too.
If this happened, central banks like the Federal Reserve could step in to stimulate economies. But their intervention can create uncertainty over the long term as investors wonder whether stock and bond prices are rising because of central bank stimulus and worry about what will happen once that support is pulled away. Analysts see problems in the underlying economy that they say central bank stimulus, or quantitative easing, cannot fix.
When nobody knows when the stimulus will end, markets move unpredictably, as investors find different ways to interpret pronouncements from central bankers.
The one reassurance is that in recent history, short-lived stock market corrections that have not turned into bear markets typically have not stopped businesses from investing and people from spending.
James B. Stewart: Top Money Managers Take Their Losses, and Move On Fund investors are looking for opportunities in global stock markets, where share prices have been battered in recent days.