Economy slowed, not stalled
The US gross domestic product grew only 2.2 percent last quarter.
from the March 1, 2007 edition
Page 3 of 3
One thing on which many economists agree is that Tuesday's stock-market slide came at a time of investor complacency. That complacency was shaken when the Chinese stock markets plunged 9 percent amid rumors that Chinese authorities were planning to crack down on speculation in their markets. Some commentators termed it "the Shanghai surprise." Wednesday, the Chinese markets recouped about half their losses.
However, the selling in China spread quickly on Tuesday to the European markets and then to the United States. The Standard & Poor's 500 index fell 3.47 percent. In an indication of how stable the markets have been recently, it was the first time since May 2003 that the index had fallen by more than 2 percent in one day.
"We can expect in the next week or two [that] the markets will be jittery or unstable, as investors come to terms with what happened," says Bob Brusca of Fact and Opinion Economics in New York. But, he adds, "the Shanghai market is not a bellwether for the rest of the world."
Market volatility can be a good thing, says Axel Merk of Merk Investments in Palo Alto, Calif. "People are just too confident," he says. "With greater volatility they will have to pare down their bets."
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