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October Marks Worst US Trading Month in 21 Years, World Leaders Prepare To Review Global Finance Regulations.

3 November 2008 - Features - Editor

Although trading picked up substantially on Friday, ending on a positive note for the second day in a row, it nonetheless brought to a close the worst month that the US stock market has experienced in 21 years. For the month of October the Dow Jones industrial index declined 14.1 percent, while the Standard & Poor’s 500 index was down 16.9 percent, which many agree that, although being down, is better than was anticipated. The advance in Friday’s market, primarily as a result of investors taking a chance on buying up bargain stocks, fueled hopes that Wall Street has indeed bottomed out.

On Friday the Dow rose 144.32 points, the S&P 500 rose 14.66 and the Nasdaq composite index rose 22.43 being 1.57 percent, 1.54 percent and 1.32 percent respectively. However, the Dow Jones Wilshire 5000 Composite Index, representing virtually all stock traded in the US, revealed that paper losses in US stock amounted to $2.5 trillion for the month, representing a 17.7 percent decline – the worst since the Black Monday crash of October 1987. Friday’s gains were echoed in Europe as share prices closed higher on the London Stock Exchange with the FTSE-100 share index up 2 percent, while the CAC-40 in France gained 2.3 percent and Germany’s DAX ended the day 2.4 percent up. These gains may be seen as an indication that the measures being taken by world leaders to deal with the global financial crisis have restored investor confidence to some degree.

The upcoming meeting of G-20 nations which is to take place on November 15 in Washington aims to discuss the restructuring of the global financial system, and decisions taken will no doubt have an effect on major markets. Following a meeting in Riyadh with Saudi Arabia’s King Abdullah, British Prime Minister Gordon Brown expressed his confidence that oil-rich Gulf States will be willing to pledge substantial amounts of money to the International Monetary Fund (IMF) to bail out countries that have been hard hit by the global credit crisis. After meeting with Brown in Doha, Qatari Prime Minister Sheik Hamad bin Jassem Al Thani noted that his country is also feeling the negative effects of the global financial turmoil and are willing to discuss ways to assist.

In view of the fact that the IMF is dominated by the United States and G7 industrialized nations, analysts are questioning what motivation the Gulf States would have for augmenting the fund. Brown has reportedly acknowledged that they have not been represented enough on international bodies to date, but anticipates this changing when world leaders begin drafting plans for new international financial regulations at the November 15 summit. The IMF has already extended emergency loans to Hungary, Ukraine, Iceland and Pakistan, and anticipate being called on for greater assistance in the weeks and months ahead.

 


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