World Markets drop on World Bank estimates of deeper recession
U.S. and European stocks tumbled, sending the Standard & Poor’s 500 Index down the most in two months, as the World Bank said the recession will be deeper than previously forecast. Treasuries rose, while oil fell below $67 a barrel and metals slumped.
Stocks and commodities slid as the World Bank said unemployment and poverty will rise in developing nations and predicted a 2.9 percent contraction in the global economy this year. That compares with a prior estimate of a 1.7 percent decline. Growth is expected to return in 2010 at 2 percent, less than the 2.3 percent forecast about three months ago.
The World Bank has ostensibly poured a big jug of ice‐ cold water over those looking for a bounce in economic growth globally Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said the global economy may suffer another slump due to higher oil prices and widening budget deficits. Oil may rise to $100 a barrel, he said.
The strengthening dollar dulled the appeal of commodities as an alternative investment, helping send copper, gasoline and oil prices lower.
Federal Reserve officials on June 24, at the conclusion of their twoday meeting, may say the U.S. is showing signs of emerging from the worst recession in a half century. Following their last meeting in April, policy makers said the economy will “remain weak for a time.” The central bankers will also keep the benchmark interest rate in the range of zero to 0.25 percent, economists said.
Traders reduced bets the central bank will raise borrowing costs by the end of the year, according to futures on the Chicago Board of Trade. Asian stocks fell, sending the MSCI Asia Pacific Index down by the most in almost six weeks, as concern an economic recovery will be delayed dragged commodity prices lower and spurred demand for the yen as a haven.
India’s stock market may rally another 15 percent over the next nine months as valuations on the benchmark index offer “reasonable upside,” JPMorgan Chase & Co. said. The Bombay Stock Exchange Sensitive Index may trade between 12,500 and 16,500 in the year ending March 2010, JPMorgan analysts led by Bharat Iyer said, based on current‐year earnings estimates.
There may still be a “near term consolidation” after this year’s gains, they added. The Indian equity markets are expected to open weak and continue to remain weak during the day.
