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Investors fret about 2009 stocks rally

World stocks fell on Wednesday after an overnight sell-off on Wall Street, with both Asia and Europe rattled by concerns over the sustainability of this year’s equity rally. The dollar was weaker against a basket of major currencies .DXY, although Wall Street looked set for a flat start.

Anxiety about the health of financials and worries the 2009 global stock market rally may have run its course hit U.S. stocks hard on Tuesday and then carried over. Japan’s Nikkei .N225 closed down 2.4 per cent for the day and Europe’s FTSEurofirst 300 .FTEU3 was down 0.5 per cent after earlier losing more than 1 per cent.It all took around three-quarters of a per cent off MSCI’S all-country world stock index .MIWD00000PUS and the more-volatile emerging market component .MSCIEF lost 1.4 per cent.Concerns have risen over the summer that stocks have risen so strongly since March that they are due a correction. “The rebound from March has been remarkable. Year-to-date gains for most of the indexes are strong, although we are still below pre-Lehman Brothers levels,” said Valerie Plagnol, chief strategist at CM-CIC Securities, in Paris. “But the glass is still half-empty.

Macro data has improved, but we’re in a pattern of destocking-restocking, and the outlook for consumer spending is still grim.”As a result, the focus is shifting toward Wall Street, where the broad S&P 500 index .SPX has fallen 3.2 per cent with three consecutive losing sessions.”The question now is whether Wall Street will consolidate at this level or fall further,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management. The yen rallied broadly, hitting a seven-week high against the dollar and other major rivals as the falling share prices stoked more risk
aversion.”We are constructive on data, we are constructive on risk as well, but price action short-term tells us that the market is already positioned for a recovery,” said Carl Hammer, currency strategist at SEB in Stockholm.

We need some more consolidation in the coming days before moving higher in terms of risk appetite.” The dollar fell 0.2 per cent to 92.69 yen according to electronic trading platform EBS, having earlier hit its lowest since mid-July. The euro was up 0.1 per cent at 1.42330 dollars.Euro zone bond yields were also relatively steady. Two-year paper was yielding 1.181 per cent and Bunds were yielding 3.222 per cent.


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