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 user 2005-05-18 at 11:25:00 am Views: 58
  • #9405
    Gloom gathers over world economy
    Investors are growing gloomier about prospects for the world
    economy and are expecting weaker growth, a survey of fund managers has

    Fewer than a quarter of the 339 managers questioned in the Merrill Lynch poll
    expected growth to increase.

    It was the most negative result since 2001, reflecting a stark reassessment
    of economic views, the bank said.

    Latest US economic data gave little cheer, with industrial production falling
    0.2% in April.

    Fears of a resurgence in US inflation were stoked by a 0.6% rise in producer
    prices, increasing the likelihood of further short-term interest rate increases.

    Soaring energy costs were largely to blame, with big increases in the price
    of oil and higher residential natural gas prices.

    Downturn expected

    Merrill Lynch researchers said their latest poll, conducted between 6 and 12
    May, showed there had been a “truly breathtaking” shift in attitudes in the last
    two months.

    A total of 56% of fund managers surveyed now expect global growth to weaken
    slightly or a lot over the next 12 months, while only 23% expected a stronger
    world economy, the investment bank said.

    A clear majority also expected corporate profits to deteriorate slightly,
    while inflation was seen as likely to increase.

    Investors expressed concern about the euro, which was seen as the currency
    most likely to depreciate over the coming year – especially if the French
    electorate were to reject the EU constitution in the 29 May referendum.

    Merrill Lynch said its previous month’s survey had highlighted a split
    between investors in the US and Europe, who had expressed caution about the
    future, and their counterparts in Asia, who had been more optimistic.

    That had now changed, the bank said, with investors across Asia appearing to
    reassess their expectations and taking a more negative view.

    “Investors in Asia, it seems, can’t escape the concerns weighing on their
    colleagues around the world,” the bank’s report said.