It now appears that equities are capitulating. That suggests they will swing too far to the downside, as markets inevitably do. The big danger for the local market is the resources boom story. Has Asia really ``decoupled'' from the US and Europe? Will domestic Asian economies really pick up the slack from evaporating demand in the West?
It is almost iconoclastic to challenge the cherished belief that the boom in China and India.
The US consumer has, more than any other factor, propped up the world economy over the past decade. That prop is gone. Cheap and abundant debt are gone. Falling sales and rising commodity prices will squeeze company earnings. The question is by how much.
Then there is oil. Present prices do look overdone and ironically the pessimism in the US and probable hard-landing there may be the one thing to take the heat out of the oil price. Were it not for the spectre of Israel bombing the daylights of of Iran in the dying days of the Dubya regime, the oil price might already be in significant decline.
