If only investors had access to the forecasting capabilities of the US National Oceanic and Atmospheric Administration. The cloud-gazers - with the apt-sounding acronym NOAA - have produced a model that has already allowed them to predict that the south-eastern US would experience a “very active” hurricane season over the next six months. Financial forecasters would welcome any guide to what might happen over the next six hours, such as been the volatility traders have had to endure of late.


An example of the schizophrenic nature of the markets was seen in London over the last few days. The FTSE 100 is a useful proxy for the neurosis gripping the world’s investors at the moment because of its position in the middle of the global trading day, its international flavour and its exposure to the commodity sector.

The FT’s offices on the south bank of the Thames are blessed with a view of the City; Tower 42, St Paul’s, the Gherkin, the lot. Your correspondent has this week been able to witness the Square Mile’s changes in meteorological and equity market fortunes, one minute lashed with rain and uncertainty, the next brightened with sunshine and hope.

Sunny then sheer

Monday was mainly gloom, the FTSE falling for the fourth consecutive session and losing 2.2 per cent as a tumble in commodities battered mining stocks. The next day, the deluge abated and with copper jumping nearly 13 per cent, the UK’s premier index gained 2.6 per cent, its best one-day performance in more than three years. Wednesday, and again it was raining cats and dogs. The dogs were the commodity stocks and the only cat visible was clearly dead and had finished bouncing. Down 1.6 per cent.

However, at the time of writing on Thursday afternoon, timid rays were treating Cannon Bridge Station and the FTSE is again higher. Still, one can’t help remembering that the last time London had such a confluence of stormy weather and twittery markets was in 1987 - and most can recall what happened then. It’s extremely unlikely that the recent turmoil presages a crash of any such magnitude but the viciousness of the mood swings draws one to the sad conclusion that even the weather can be more predictable than the market’s mood.

Meanwhile, in the real world

While the 2006 typhoon was lashing the markets the global economy continued to trundle on its merry way. The Organisation for Economic Co-Operationa and Development, the rich countries’ think-tank, raised its global growth forecast from 2.9 per cent to 3.1 per cent for this year and noted expansion in the US and Japan would be above trend over the coming months. China, said the OECD, would grow by 9.7 and 9.5 per cent this year and next - a forecast that helped that rise in the copper price on Tuesday.

Imbalances such as the huge US trade deficit posed a risk, warned the Paris-based body, but its twice-yearly report was taken as confirmation that the sell-off in stocks and raw materials was the result of shifting risk profiles rather than any reflection of the health of World plc.

Goldi XXI: This time it’s personal

Other data supported this relatively rosy assessment. Particularly heart-warming for investors was the return of Goldilocks - a character whose ability to burst back upon the scene when all thought she was finished rivals the Terminator. Wall Street likes the idea of growth that is not too hot and not too cold. It allows for more profits while reducing the risk for the Federal Reserve to have to tighten monetary policy to contain inflation. Thursday’s US GDP numbers found the economic porridge just right. Growth for the first quarter was revised up to 5.3 per cent compared to the same period in 2005 and the fastest expansion in two and a half years. Significantly, inflation was subdued, with the Fed’s closely watched core personal expenditure price index rising just 2 per cent, down from the 2.4 per cent recorded in the fourth quarter.


One thing you don’t want when your financial markets are receiving a thorough shellacking is for an important global institution to start wielding the stick.

Turkish shares had already been fully partaking in the recent emerging market sell-off, when the International Monetary Fund waded in with a warning that the country’s central bank needed to a adopt a more cautious monetary policy and the government should cut back public spending.

Investors have been attracted to the Istanbul market on hopes the economy would revive following a programme of reforms and with future entry into the European Union. The IMF’s assessment adds to concerns that the Turkish government’s fiscal position will stymie its reforming agenda. Add that to worries that EU accession may yet falter on the Cyprus issue and a current account deficit that measures about 7 per cent of GDP, and it was little surprise to see the Turkish lira hit with such venom in these more risk adverse times. The lira has now lost about 17 per cent this month and Istanbul’s main equity index is down by a similar 18 per cent over the same period.


We tend to lap up excesses of speculation and market turmoil. Soaring and plummeting make great copy. But we should not forget such lurches can have tangible and sometimes tragic results. At one stage earlier this week, before the markets regained a semblance of poise, Indian equities had registered a fall of 22 per cent within the space of just eight trading sessions.

Reassuring comments from the central bank and finance ministry helped calm proceedings on Monday but the damage may already have been done for some participants. Reuters reported that the Indian police force said they were on the lookout for possible suicides by brokers and investors. “Gold has turned into brass. We are finished,” said one male Mumbai broker. One can only hope he wasn’t tempted to do anything rash. By Tuesday, gold had regained some of its lustre.

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