Dubai: European shares experienced a miserable start to the fourth quarter yesterday after the Greek government said it would miss its deficit targets.
The bleak economic outlook is not expected to improve in the lead-up to Christmas with analysts predicting further volatility across global equity indexes over the next three months.
The pan-European FTSEurofirst 300 index suffered its biggest quarterly fall since the 2008 collapse of Lehman Brothers in the period from July 1 to September 30, 2011. Britain's FTSE 100 index had its worst quarterly drop since third quarter 2002, losing £212 billion in value.
The situation is set to get worse, however, with several European nations, including Spain and Italy, scrambling to steer clear of the debt crisis. Athens said yesterday it would fall well short of its deficit target, sending global stocks into a downward spiral.
"If the situation goes on like this, we will continue to see equities fluctuate because there is not a clear enough vision going forward. I do not think we will see a Greek default before Christmas but we will not see a full solution either," said Husam Hourani, managing partner at the law firm Al Tamimi & Company.
"We have never seen a situation like this before where equities, bonds and commodities are all going down at the same time. Unfortunately, a lot of investors started to speculate on gold, which became ridiculous and started to fluctuate in the same way as currencies; a lot of people have lost faith in where to keep their core investments," he added.
Hourani also suggested that many investors were in favour of a Greek default several months ago, adding that the Eurozone's problems had already started to impact on Asia. "The market has already factored in a Greek default; you can see that with the 25-40 per cent drop in European banking shares over the last few months. They will continue to drop every time there is a new piece of bad news, whereas if Greece was allowed to default the market would have dealt with it, as opposed to having to go through all these interim measures," Hourani said.
"There is little optimism that global markets will pick up and move forward [in this quarter]. They may not drop substantially but they will remain on the negative side," he said.
Markets: Stocks down
Gulf stock markets ended lower on Monday; in line with international equity weakness-amidst worries over a potential global double-dip recession.
- Dubai shares finished -1.6% at 1407.58; the market last closed lower at 1375.13 on March 7.
- Abu Dhabi's market was down 0.7% at 2519.02
- Doha's benchmark index was down 0.8% at 8290.83
- Kuwait slipped 0.5% to 5811.90.
- Saudi shares traded -0.9% at 6057.17.
