Global stock markets lost their momentum by the-close of last month, being hard hit by a succession of US corporate scandals and the prediction of a slowdown in the global economy, which places the US at risk of a recession by the end of the year, according to analysts at Morgan Stanley.

A turnaround in the stock markets did not crystallize throughout the month. Many attributed the market crash to the revelation of an accounting fraud at WorldCom — a large US telecommunication firm, while others argue that the a long-term trend in the falling markets would be inevitable notwithstanding the large-scale corporate collapse, as the global economic slowdown prevailed throughout last year has not ended.

The slowdown in the global economy is evident in all parts of the world. A slowdown in U.S. growth coupled with the Asia and Latin American economies growing at a slower pace than expected has spilled over into Europe by way of worse-than-expected performance in European economies. The fear of the state of equity markets is that it builds up negative consumer and company sentiment.

The most recent drop in the markets was attributable to the accounting scandal in the US which raised concerns about the accounting standards adopted by the companies to release their earning prospects on the basis of which investors evaluate companies’ profitability and their future prospects.

Amidst the gloomy outlook, the Dow Jones industrial average in New York lost 507 points, or 5.4% during the month. The Nasdaq composite lost more than 135 points, or 9.0%.

In London the FTSE 100 reported a negative growth of 10.3% during the month under review.

In Asia Japan’s leading index, the Nikkei, settled 7% lower than the previous month while in Hong Kong, the Hang Seng closed 3.2% down. In South Asia Bombay’s BSE SENSEX reported a negative growth of 8% during the month while KSE (Karachi) moved up by 1%.

Colombo

The All Share Price Index which opened the month at 711.4 points recorded its highest point for the month (728.4points) on July 4 and closed the month at 700 points, moving down by 1.6%. The Milanka Price Index (MPI) shed 0.6% during the month. A total of 82.2 Mn shares were traded with an average daily turnover of Rs. 90.6 Mn. Foreign investors continued to be net buyers in the market for the fifth consecutive month with net purchases of Rs 2.2 Mn.

(CSE July Market Report)