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Context of 'June 22, 2009: Stocks Fall, Commodities Drop in US, Europe as World Bank Revises Previous Forecast, Predicts a Deeper Recession'

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The Royal Bank of Scotland (RBS) predicts “a full-fledged crash in global stock and credit markets over the next three months as inflation paralyzes the major central banks.” RBS credit strategist Bob Janjuah says, “A very nasty period is soon to be upon us—be prepared.” Bolstering Janjuah’s dire predictions, the RBS bank research team warns that the Wall Street equities index, Standard & Poor’s (S&P) 500 index is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from what the Daily Telegraph describes as “the excesses of the global boom, with contagion spreading across Europe and emerging markets. Such a slide on world [markets] would amount to one of the worst bear markets over the last century.” Janjuah also warned of the credit crisis in 2007. RBS predicts that Wall Street would rally a little in early July before quickly fizzling out. “Globalization was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point,” Janjuah says. RBS debt market chief Kit Jukes says Europe will not be immune from the problems: “Economic weakness is spreading and the latest data on consumer demand and confidence are dire.” [Daily Telegraph, 6/19/2008]

Entity Tags: Bob Janjuah, Royal Bank of Scotland, Kit Jukes

Timeline Tags: Global Economic Crises

NYU Economics Professor Nouriel Roubini tells Bloomberg News that, following the $350 billion injection by the Bush Administration, President Barack Obama will have to use as much as $1 trillion of taxpayer funds to shore up capitalization of the banking sector. “The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.” Roubini also predicts that oil prices will continue to trade between $30 to $40 a barrel all year. Regarding commodities, Roubini said, “I see commodities falling overall another 15-20%. This outlook for commodity prices is beneficial for oil importers, it’s going to imply that economic recovery might occur faster, but from the point of view of oil exporters, this will be very negative.” [Street Insider.com, 1/20/2009; Bloomberg, 1/20/2009]

Entity Tags: Barack Obama, Citibank, Nouriel Roubini, Bank of America

Timeline Tags: Global Economic Crises

The World Bank predicts a 2.9 percent contraction in the global economy and adds that unemployment and poverty will continue to rise in developing nations in 2009. The revised previous estimate of a 1.7 percent decline causes a slide in US and European stocks and commodities. Three months ago, the World Bank issued a new estimate of 2 percent in 2010. Although the S&P 500 remains up 33 percent from its 12-year low in March, since June 12, the index has fallen 5.1 percent. Last week, the S&P 500 lost 2.6 percent, as a turndown in crude oil wounded fuel producers and Standard & Poor’s rating agency downgraded 18 banks’ credit ratings. Speaking in Paris today, economics professor Nouriel Roubini—who predicted the current financial crisis as early as 2006—says the global economy could suffer another slump due to higher oil prices and increasing budget deficits. “I see the worry of a double whammy” because of energy costs and fiscal burdens, thus increasing the risk of a setback in the economic recovery. He says that oil might rise to $100 a barrel. The increase in the value of the dollar blunted the appeal of commodities as an alternative investment, and sent copper, gasoline and oil prices lower. Amid the resignations of two more board members, bringing the total of departing directors to seven since April, Bank of America stock falls 6.1 percent to $12.41, the bank’s steepest intraday decline since May 15. It is expected that at the end of their two-day meeting on June 24, Federal Reserve officials might announce that the US is showing signs of surfacing from the worst recession in 50 years, although, after their last meeting in April, they announced that the economy would “remain weak for a time.” It is anticipated that central bankers will keep the benchmark interest rate in the range of zero to 0.25 percent. [Bloomberg, 6/22/2009]

Entity Tags: World Bank, Bank of America, Nouriel Roubini, US Federal Reserve, Standard & Poor’s

Timeline Tags: Global Economic Crises

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