Share investors brace for rocky ride

Tokyo's markets are approaching 18-year lows

Investors will be bracing themselves on Monday for another rough ride on the world's stock markets.

Last week was marked by turbulent trading as renewed fears over the health of US economy sent stocks plunging.

The downwards trajectory also dashed hopes early last week that the stock markets were attempting a recovery.

Friday close

US Dow Jones
-193 to 8,313

US Nasdaq
-32 to 1,248

Germany's Dax
-74 to 3,532

London's TSE
+31 to 4,076

France's Cac
+5 to 3,245

Japan's Nikkei
-50 to 9,744

In London, this coming week, investors will be looking for a steer from a slew of banking results, including HSBC on Monday and Royal Bank of Scotland.

Key UK industrial data, due to be released on Monday, could also offer the markets a boost as it is expected to show that manufacturers are coming out of a recession for the first time in a year.

Nevertheless, hopes of a rebound are not high.

"I can't see the market staging a huge recovery next week," said Jeremy Batstone, head of research at NatWest Stockbrokers.

Meanwhile, stocks in Tokyo are expected to approach 18-year lows again this week, as volatility on Wall Street shakes investor confidence.

Last week's roller coaster

The US' leading stock index, the Dow Jones, started last week with an impressive 5% rise, but ended with two days of heavy falls that pushed it almost back to where it started.

Similarly, London's FTSE ended the week just 60 points above its closing price the previous week - having been on a rough ride in-between.

The market turmoil has continued even though the US has adopted a tough new stance on corporate fraud - and despite an easing in the string of Wall Street scandals.

On Friday, the leading index in Paris managed to stay out of the red, but Germany's Dax index was dragged lower.

The Asian stock markets also closed mostly lower on Friday, dragged down by sharp losses overnight on Wall Street.

Engine of world growth?

Fears are rising about the state of the US economy after disappointing growth figures were released on Wednesday, increasing the threat of a double-dip recession.

It's a potential landmine and there is nothing to do but wait and see whether it blows up

Hugh Johnson
First Albany

The bad news continued with some poor corporate results and weak unemployment figures.

On Friday, Goldman Sachs investment bank predicted the US Central Bank would cut interest rates to 1% before the end of the year, increasing the feeling that the US economy recovery would be fragile.

Stock markets around the world tend to react to such news from the US, as the prospects for their own economies are closely linked.

Cleaning-up

This year's bear market - a period of prolonged pessimism on stock markets - has been provoked by a series of corporate scandals on Wall Street.

The companies to blame - Enron, WorldCom and Xerox among others - have presented their financial results in a misleading way to investors.

In a move to draw a line under the deception, the financial watchdog has given all major firms until 14 August to certify the accuracy of their results.

NatWest's Mr Batstone said that the looming deadline would not help steady nerves.

"Until we get past that there is the possibility that a chief executive will refuse to sign off on accounts," he said.

"And in an environment in which speculation and fears are master, any rumours will have an adverse effect on share prices."

Last week, media giant AOL Time Warner admitted it was being investigated by the US Department of Justice, while telecoms firm Qwest said it had used improper accounting methods.

"It's a potential landmine and there is nothing to do but wait and see whether it blows up," said Hugh Johnson, chief investment officer at First Albany.