Investors wary as stocks reach tipping point

World stocks, measured by MSCI, hit their lowest level in almost two years last week as concerns intensified over the fate of U.S. mortgage firms and the health of major banks facing further asset-related writedowns.

In the case of Europe, if the market ends down on the month again, the pan-European FTSEurofirst 300 index will have fallen for 9 out of the past 10 months.

Equity troubles come against a backdrop of sharp about turns in other major markets last week, that the next few days should demonstrate to be either renewed trends or mere blips.

What looked like an end to the sharp rally in oil and commodities might have proved a false dawn as crude oil jumped 6 percent last week and the Reuters-Jefferies CRB index of commodities futures making its biggest weekly gain since July 1975, feeding into inflation jitters.

And the dollar’s August rally appeared to have lost momentum with the U.S. currency suffering its biggest one-day drop in five months against major currencies last Thursday.

Meanwhile, stock markets languish.

“Long-only equity managers are obviously struggling and they are in the red. You’d find it difficult to get back to the level pegging for the year,” said Richard Batty, global investment strategist at Standard Life Investments in Edinburgh.

“We are fearful we are in a slow growth period ... That’s why we favor cash and bonds over equities and property.”

Earlier in August, oil’s US$30 plus tumble from its July record peak above US$147 and a retreat in broader commodity prices had eased concerns over inflation, which discourage central banks from cutting interest rates to tackle economic slowdown.

This week’s consumer inflation data from Germany, Italy and the United States might reflect some easing in price pressures.

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