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K. S. Badri Narayanan

IF IT were lingering concerns of more terrorist attacks that affected the US markets, a 4 per cent drop in global mobile phone sales was a wrong call for European markets; it is perhaps best not to speak of the sub-continent — the growing fear of war between India and Pakistan kept the markets in a tizzy. Overall, the sentiment was dull and depressed in May.

However, the Japanese market weathered the storm as the Nikkei 200 ended the month in the positive territory. A Japanese Government report had signalled that the economy probably expanded in the first quarter after shrinking in the previous three, while the Bank of Japan raised its assessment for the third month, suggesting that the economy stopped deteriorating after 18 months of recession.

These reports could have acted as a catalyst to investors to show their confidence in the Japanese markets.

Thailand's SET and Australia's All Ordinaries Industrial Index too finished in the positive territory.

Despite the US Commerce Department's announcement that the economy grew in the first quarter at the fastest pace in nearly two years, the markets remained subdued. That the US economy grew at a seasonally adjusted annual rate of 5.6 per cent from January to March, which is below the forecasted 5.8 per cent growth announced in April, seemed to have cast a shadow.

In addition, the Federal Bureau of Investigation's (FBI) repeated warnings to the US Government that terrorists are planning more attacks seemed to have triggered fresh nervousness among investors, pushing the markets to lower levels.

Cisco Systems surprised the markets by announcing upbeat quarterly earnings report, sending the markets the world over to bounce sharply.

However, the adage "one swallow does not make a summer" held true as the Cisco-inspired rally was short-lived, following the more overriding developments. However, in the process the Nasdaq registered its biggest one-day gain on May 8 in a year.

Major European stock markets ended the month in the negative territory. European markets were undermined by telecommunications and technology stocks as investors grew ever more wary of recovery prospects. Further, the concern that phone-equipment makers' (Ericsson AB and Noka Oyj) customers would not increase their spending soon also dampened the sentiment.

On the economy front, the UK economy was the worst performer among the Group of Seven (G-7) countries. Economic output stagnated for six months, with zero growth in the first quarter of 2002 and in the last quarter of 2001, according to Office for National Statistics. Now, the economists are in serious doubt whether the Government can achieve its forecast of 2-2.5 per cent growth for this year.

Nuclear neighbours — India and Pakistan — witnessed a sharp erosion in stock values. War rhetoric between them mauled the sentiment badly, sending investors, particularly foreign institutional investors, away from the markets.

The reported US, Australian and New Zealand Government's advise to its citizens to stay away from the Indian sub-continent further eroded the investor confidence.

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