Stock mar­kets un­der a cloud amid debt cri­sis

Cape Breton Post - - BUSINESS - BY MALCOLM MOR­RI­SON

ers be­hind the global econ­omy’s re­cov­ery from the down­turn. So in­vestors were un­set­tled Fri­day when China moved to raise its re­serve rate by half a per­cent­age point, which would re­quire large banks to set aside more cash, which in turn would leave less money to lend out.

While in­vestors may have been dis­mayed at the news, an­a­lysts said it was the right thing for China to do in or­der to keep eco­nomic growth strong.

“They have been do­ing some jawboning to cut back on lend­ing, and now they’re in­creas­ing re­serve re­quire­ments, they’re not mak­ing big ad­just­ments in their cur­rency or in in­ter­est rates,” Johnston said.

“They could make a mis­take and we could have a sharp down­turn in the Chi­nese econ­omy — but that’s not the strat­egy. They’re shoot­ing for some kind of mod­er­a­tion in growth that will help re­strain inflation.”

The rally on stock mar­kets started al­most a year ago and was based on the con­vic­tion that the re­ces­sion would end later in 2009 and an eco­nomic re­cov­ery would be in place by the end of the year.

Now, it’s a bit more dif­fi­cult to see what this year is go­ing to be like.

But John­son pointed out that the im­por­tant sig­nals are at least point­ing in the right di­rec­tion.

“The eco­nomic num­bers show a build­ing case for sus­tain­able growth, so it sug­gests the pes­simists are too pes­simistic,” he said.

“But the num­bers also don’t say, this is go­ing to rock and roll here.”

The Toronto stock mar­ket will be closed to­day for the On­tario Fam­ily Day hol­i­day, while New York mar­kets will be shut­tered Mon­day for Pres­i­dents Day.

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