FTSE 100 loses more than 7% this week and dives under 4000 mark.
This week, stock markets plunged all over the world on further bleaks news on the world economy. Earlier this week, US stimulus package worth $787 (small than its original size) was legalised by President Barack Obama. However, there wasn't any positive reaction from the markets. First, the Congress passed the bill last week, so this week's legalisation was not much more than a symbol. Second, it is significantly smaller than its original size (and much smaller than some people claim to be necessary in order to revive the US (and global) economy). Third, it lacks certain clarification despite being 1100 pages long. It is the uncertainty, that is harming the economy and financial markets in the last 6 months and both the US fiscal stimulus package and new banking bail-out plan, worth $1.5 trillion, by US Treasury Secretary Tim Geithner lack clarity which is so-much-in-need.
This week, new results came out on Japan's economic state, and it is worse than expected. The second largest economy in the world fell by 3.3% from the previous quarter, which is equivalent to 12.6% fall at annualised rate - horrifying contraction. Its industrial output fell by more than a fifth in the year to December 2008.
Other Asian tigers are suffering too. South Korean GDP fell by 20.8% at annualised rate in the last quarter of 2008, while its industrial production fell by 18.6% in the year to December 2008. Taiwan saw its economy shrink by 8.4% in the year to the last quarter of 2008.
I am expecting to see a bounce back in stock markets next week or week after despite economic turmoil.
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