The market pays the price for cloak-and-dagger news
(23 August 2011 – Australia) Australia’s big four banks have pulled in billions of dollars of profit in the past year, mining is booming, retail is slumping and there is a hint of unemployment rising - so what is a legitimate concern and what have we talked ourselves into?
In an article published by The Sydney Morning Herald last week, Investment bank Morgan Stanley released a report warning of global growth slowing to dangerous levels – this by itself managed to impact major United States indexes as well as markets in London, Paris and Frankfurt with falls in the 4 to 5 percent range.
Big losses on overseas sharemarkets then spread to Australian shares, falling 3 percent literally within minutes of opening, wiping A$40 billion from the value of Australian companies.
The Morgan Stanley report signalled that the languishing economies of the US and Europe were in danger of sliding back into another damaging economic slowdown, just two years after the end of the last one.
'A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US. This should be aggravated by the prospect of fiscal tightening in the US and Europe,' it said.
The Morgan Stanley document said the US and euro zone were 'dangerously close to recession', it criticised policymakers and predicted the European Central Bank, which hiked interest rates earlier this, will have to reverse its current policy.
Fear mongering from institutional banks keep having huge effects on shareholders, brokers and whole economies, where is the responsibility? Trading is often rumour based among minor investors, who also possess a seemingly ‘sheep-like’ mentality, so what purpose did the Morgan Stanley report serve? For a top, well respected investment bank like Morgan Stanley to release a report outlining the bad shape that the economy is currently in, will this make the situation even morse?
Within the report published on The Sydney Morning Herald (SMH) website phrases such as "fear still stalked global markets," and "suffered a stockmarket wipeout", were highlighted linking to further cloak-and-dagger articles.
In another article the first line included "Local shares are expected to open flattish tomorrow" is this a self-fulfilling prophecy?
The media has the ability to sway investors, why aren’t the brokers controlling the situation with the old adage "sell high, buy low". Some however do offer sound comments which end up lost at the bottom of stories.
CommSec chief economist Craig James told The Sydney Morning Herald he saw no real driver for the share falls in overseas markets on Friday.
''Markets were down again but they didn't get hammered,'' he said. ''I'm expecting local investors will look to pick up some bargains on Monday - and there are plenty around right now - and this should put a floor under local shares.''
In Friday’s article regarding the Morgan Stanley report, the very last paragraph was this:
That was not the bank's base case scenario, (according to Joachim Fels, who co-heads Morgan Stanley's global economics team) noting the corporate sector still looked healthy and lower inflation will ease pressure on consumers' wallets, while central banks such as the Federal Reserve and ECB could try to loosen policy further.
Imagine if that had been the angle of the story.
(Melissa Luxford & Oliver Dowling)
Big losses on overseas sharemarkets then spread to Australian shares, falling 3 percent literally within minutes of opening, wiping A$40 billion from the value of Australian companies.
The Morgan Stanley report signalled that the languishing economies of the US and Europe were in danger of sliding back into another damaging economic slowdown, just two years after the end of the last one.
'A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US. This should be aggravated by the prospect of fiscal tightening in the US and Europe,' it said.
The Morgan Stanley document said the US and euro zone were 'dangerously close to recession', it criticised policymakers and predicted the European Central Bank, which hiked interest rates earlier this, will have to reverse its current policy.
Fear mongering from institutional banks keep having huge effects on shareholders, brokers and whole economies, where is the responsibility? Trading is often rumour based among minor investors, who also possess a seemingly ‘sheep-like’ mentality, so what purpose did the Morgan Stanley report serve? For a top, well respected investment bank like Morgan Stanley to release a report outlining the bad shape that the economy is currently in, will this make the situation even morse?
Within the report published on The Sydney Morning Herald (SMH) website phrases such as "fear still stalked global markets," and "suffered a stockmarket wipeout", were highlighted linking to further cloak-and-dagger articles.
In another article the first line included "Local shares are expected to open flattish tomorrow" is this a self-fulfilling prophecy?
The media has the ability to sway investors, why aren’t the brokers controlling the situation with the old adage "sell high, buy low". Some however do offer sound comments which end up lost at the bottom of stories.
CommSec chief economist Craig James told The Sydney Morning Herald he saw no real driver for the share falls in overseas markets on Friday.
''Markets were down again but they didn't get hammered,'' he said. ''I'm expecting local investors will look to pick up some bargains on Monday - and there are plenty around right now - and this should put a floor under local shares.''
In Friday’s article regarding the Morgan Stanley report, the very last paragraph was this:
That was not the bank's base case scenario, (according to Joachim Fels, who co-heads Morgan Stanley's global economics team) noting the corporate sector still looked healthy and lower inflation will ease pressure on consumers' wallets, while central banks such as the Federal Reserve and ECB could try to loosen policy further.
Imagine if that had been the angle of the story.
(Melissa Luxford & Oliver Dowling)
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