you know the saying, when the US sneezes, the world catches a cold.
few snippets from today's WSJ on exactly these topics.
Stocks' Pain Touches All Regions of the Globe
U.S. Ripple Effects
Rattle India, China;
'Loss of Confidence'
The Dow Jones World Index, excluding U.S. shares, fell 8.7% in dollar terms in the first quarter. The Dow Jones Industrial Average dropped 7.6%.
Some of last year's highflying markets, like India and China, have seen this year's worst drops, with shares in both countries down more than 20%. Japan's stock market, a laggard in 2007, fell deeper into the red, with the benchmark Nikkei Stock Average of 225 companies down 18%.
The gloom has been equally intense in Europe, with benchmark indexes in the United Kingdom, Germany and France each falling more than 10%. Germany's DAX index had the biggest decline of the three, tumbling 19%. France's CAC 40 index dropped 16% and the U.K.'s FTSE 100 fell 12%.
Such declines around the world illustrate how far-flung markets have become correlated.
China and Core Inflation
By STEPHEN S. ROACH
THE WALL STREET JOURNAL EUROPE
April 1, 2008
HONG KONG -- China has a serious inflation problem. In February, consumer prices were up 8.7% from year-earlier levels -- the sharpest increase in 12 years. China's policy makers are rightfully concerned about this outbreak of price pressures. Unfortunately, they are getting bad advice from so-called experts who have been asked to weigh in on this key issue....
...A key premise underlying this conclusion was that in both cases -- food and energy -- recent price surges were outbreaks of increasingly global forces. It quickly became conventional wisdom to refer to China's "imported" inflation problem.
On the surface, the numbers appear to bear out this conclusion. If you strip out food, China's core inflation is holding at just 1.6%. Putting it another way, about 90% of China's annualized 8.7% inflation rate can be attributed to food alone. Take energy out as well, and the core rate drops to 1.1%. Under the presumption that these sources of inflation are likely to taper off -- if not reverse -- the experts concluded that fears over a more widespread Chinese inflation were overblown. As a result, China's domestic policy makers were urged to refrain from a further tightening of macro stabilization measures, such as monetary policy.
