Reality hits home

The Dow Jones Industrial Average (Dow) declined 1.39% to 10,009 points overnight on concerns of the US economy. The second quarter 2010 economic growth for US slowed to 1.6% on an annual basis. This compared unfavourably with first quarter 2010 growth rate of 3.7% and 5% achieved in the last quarter of 2009.

European stock markets lost ground today. As at now, the FTSE 100 index lost 0.8%, DAX (Frankfurt) lost 0.79%, CAC 40 (Paris) lost 0.92%.

Japan was badly hit with its Nikkei 225 index losing 3.55% to 8,824 points. Japan’s economic problem is due mainly to deflation and the high yen value against the US currency. This will seriously hurt its exports, in particular to the US, and hence the economic growth of Japan.

Both Hong Kong and Singapore did not fare any better. Hong Kong’s Hang Seng index declined 0.97% and the Straits Times Index (STI) declined 0.3%.

This is the reality of the global economy. For the second half, we may see a slowdown when compared with the first half. Caution is advised on equity investment, as this will be the first place to get hit as the economies slowed.

Copyright © 2010, the author known as LKT in Singapore.

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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