 |
US Stocks and Dollar Fall Threatens World Economy, IMF Warns
The International Monetary Fund (IMF) warned that further plummet in US stocks and "a potentially disruptive drop in the value of the dollar" would increase the danger of instability in the international financial markets.
In its annual report on capital flows released Thursday, the IMF pointed out that price-earnings ratios in the US and other major markets stood "somewhat on the high standards of historical averages."
It added that a "sharp repricing" in US stocks would pose a " key risk" for the global economy.
On Thursday, the NASDAQ composite index rushed up 5.3 percent to close at 2075.7 in New York Stocks Exchange. However, the IMF said that the U.S. stocks markets are being ballooned by the belief that the interests cuts by the US Federal Reserve would bring the drooping economy back to normal and that the productivity in the United States is still growing at a sound pace.
If either of the two assumptions proved wrong, the IMF warned, projections of earnings would be modified downward, pressing the US stocks and corporate bonds to drop.
If expectations were revised more sharply in the United States than in the rest of the world, the value of the dollar would go down, triggering "considerable volatility in the major foreign exchange markets," the IMF warned.
In This Section
|