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'
<p class="times">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%.</p>
<p class="times">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%.</p>
<p class="times">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%.</p>
Such declines around the world illustrate how far-flung markets have become correlated.
China and Core Inflation
By <strong>STEPHEN S. ROACH</strong>
<strong>THE WALL STREET JOURNAL EUROPE</strong>
April 1, 2008
<p class="times">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....</p>
<p class="times">...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. </p>
<p class="times">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.</p>