Monday, January 6, 2003
U.S. equity markets and the dollar rebounded with a vengeance on 2003's first day of trading when the ISM manufacturing purchasers' index unexpectedly shot up. This was in stark contrast to PMIs released earlier in Europe (both for individual countries and the EMU) and Britain where the indexes continued to sink for a fourth month. European manufacturing has been weighed down by falling employment levels, smaller inventory purchases and, most worryingly, a tail-off in new orders, the most forward-looking component. Europe's new orders component fell to its lowest level in a year. British manufacturing also disappointed as activity in December contracted for the first time since August. The news pushed the euro down below $1.04 against the dollar, its lowest level on the week. On Tuesday, the euro had climbed to $1.05 on geopolitical concerns, a three-year high.
Trading was light even by week's end. It was as though investors were reluctant to return after two holiday weeks. Aside from Thursday's momentary euphoria, market performance was lackluster. Gains ranged from a high of 8.9 percent (Frankfurt DAX) to 0.6 percent (South Korean Kospi), while losses ranged from 0.1 percent (Singapore Straits Times) to 1.6 percent (Nikkei).
For the record...
World stock markets drew the line under a third consecutive year of losses. The 2002 declines were spread across the globe with the United States, Britain, Japan and particularly Germany leaving the year deeply in negative territory. Weak economic growth, corporate scandals, bankruptcies, profit warnings, dividend cuts, asbestos litigation, the forced selling of equities, volatility, fears of deflation, the conflict in the Middle East and terrorism all scared the markets. While the downturn in world markets has prompted one of the most dramatic liberalizations in monetary policy since the Second World War, some equity strategists believe further action will be needed before institutional investors are tempted to buy shares again.
In the U.S., the Dow fell 16.8 percent and the NASDAQ composite sank 34 percent during the year. London was down 31.5 percent. Tokyo rang out 2002 with an 18.6 percent decline in the Nikkei. The market sank to a 19-year low in mid-November and suffered the ignominy of nine consecutive losing sessions, its longest losing streak in 11 years. In Europe, the German DAX was the worst performing index of those tracked here, sinking 43.9 percent as hopes for a recovery continued to be frustrated. The Paris CAC lost 33.7 percent and turned in the second worst performance. The best performer was the Mexican Bolsa, which only slipped 3.8 percent on the year while the South Korean Kospi followed with a 9.5 percent loss. The Kospi had been up on the year as recently as the third week in December, before North Korea abrogated its commitment not to operate nuclear facilities.
A New Year's resolution?
