Monday, January 21, 2008

Quick Takes: World markets remain coupled to US economy

While the U.S markets are closed in observance of the Martin Luther King holiday, foreign markets nose-dived today. European and Asian stock markets plunged on the fear of a US recession. Even the Chinese markets, which many times appear to be uncorrelated with the remainder of the world, recorded the largest percentage drops since the September 11th terrorist attacks. Leading the downside, India’s markets dived 7.4%. Most other markets were not far behind; the DAX index in Germany closed off 7.16 percent and the CAC 40 in France lost 6.83 percent. British stocks fared less badly; the FTSE 100 lost 5.48 percent. Canadian and Mexican stocks were off sharply at midday.

How will Wall Street play this on Tuesday? The U.S. market is likely to open lower, but most traders will attempt to play the market to the long side during the day on the expectation that excess fear has placed the markets in an oversold condition.

European, Asian Markets Plunge