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 Wednesday, 1 January, 2003, 11:38 GMT
Investors' losing streak continues
Trader at NatWest stockbrokers
Traders are hoping for better times in 2003
World stock markets have racked up a third consecutive year of losses, making the current share price slump one of the longest on record.

History teaches us that we may be at or near the bottom

David Schwartz, stock market historian
The decline reflects sluggish economic growth, weak corporate profits, a spate of accounting scandals in the US, and fears over war in Iraq.

With no obvious trigger for a recovery in sight, the slump is now drawing comparisons with previous traumatic share price collapses such as the 1929 crash or the financial meltdown that followed the oil price shock of 1973-74.

On Wall Street, the Dow Jones index of blue-chip US shares - which sets the tone for stock markets world wide - finished the year almost 17% lower, while London's FTSE 100 settled down 24% on Tuesday.

Europe's woes

Over on mainland Europe, investors have had an even more torrid time of it.

Open in new window : Slippery slopes
Markets across the world had a difficult year.

On Monday, Germany's benchmark Dax index finished the year a massive 44% lower, making it the worst performing major stock index of 2002.

In France, returns on shares were only slightly better. Although the Cac closed higher on the last day of the year, it lost more than a third of its value during 2002 after the steepest annual decline in its history.

Karachi Stock Exchange
The Karachi Stock Exchange has had a bumper year

There has been no respite either for investors in Japan, where the Nikkei index settled 19% lower on the year on Monday, posting its weakest year-end close since 1982.

But the full extent of the share price rout is best illustrated by looking at the major markets' performance since they reached their peak valuations at the tail-end of the late 1990s technology boom.

The FTSE 100 is now down 43% from its all-time high of about 6,900, which it reached on New Year's eve 1999.

The Dow, meanwhile, has fallen 28% from its January 2000 peak of 11,700, notching up its first three-year losing streak since 1939-41.

Turning around?

According to stock market historian David Schwartz, the decline is approaching in severity the kind of collapse usually associated with "catastrophic" events such as a serious military setback during wartime.

However, historical analysis suggests that a recovery may be waiting in the wings, he believes.

"We are at the deep end of a normal bear market. But history teaches us that we may be at or near the bottom," Mr Schwartz told BBC News Online.

One factor which may lift stocks next year is the 2004 US Presidential election, which is likely to boost investor sentiment as candidates start pledging better times to come.

"Over the last half century, every time there has been a US Presidential election, UK stocks have risen the year before," Mr Schwartz said.

Emerging hope

And while investors in the major global stock markets are unlikely to have made much money this year, stocks in emerging market economies have decisively bucked the gloomy trend.

In Pakistan, the top 100 shares on the Karachi Stock Exchange have soared by more than 100% since the start of the year, making it the world's best performing stock market by far.

Elsewhere in Asia, double digit annual gains were recorded on the Sri Lankan and Thai leading share indexes, while stocks also rose, albeit more moderately, in Indonesia and India.

And in crisis-torn Argentina, the Merval share index finished the year 62% higher than it began, lifted by signs of an economic recovery and hopes of a new financing deal with the International Monetary Fund.

  The BBC's Evan Davis
"For the third year running shares have gone down"


The Markets: 9:29 UK
FTSE 100 5760.40 -151.7
Dow Jones 11380.99 -119.7
Nasdaq 2243.78 -28.9
FTSE delayed by 15 mins, Dow and Nasdaq by 20 mins
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See also:

30 Dec 02 | Business
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11 Dec 02 | Business
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