Mixed Signs on Troubled Global Financial Markets

The Dow Jones Industrial Average experienced a massive rally recently, as did most global markets, but the general trend for the first half of 2009 continues sideways. In Asia, banks jumped recently as described by MSN Money, quote“…with banks extending gains on hopes the struggling global financial system is stabilizing”.

Hope has no place on the financial market unless you are into funding abstract start-ups but the use of the word is perhaps indicative of today’s global sentiment: unstable uncertainty and suppressive denial of  indications of further decline.

The fact that the market contractions are gradual and constant instead of sharp massive corrections marks a historic difference to earlier crashes and bursting bubbles.

The current financial trends also react (or will react) to the spread of dependencies being more complex than ever. In the maximized scale, just consider the economic interaction between USA and China:  China is funding part of the US recovery. In this, the angle of balance is shifted.

For the moment, China is still showing strength, but the Bank of Japan warns of further contraction of the Japanese economy.

If the 2009 Q1 numbers for China come in more red than expected the shrinkage of China global activities will affect all of us. China itself will cope better than most since their political and cultural system can still backtrack to a more centralized control and rural focus.

Meanwhile, President Obama´s outrage at the AIG distribution of taxpayer support is indicative of another aspect of our times. Speed is (was?) of essence to abort the doomsday scenario of tens of millions of jobs lost. It was probably a sound move but the necessity of speedy delivery overtook the system with a loss of control and direction.

In view of this, it is not surprising to see how the received funds were, are, and will be spent. None of the receiving corporate parties are in the market of employee support. Survival of the entity is at the top of the agenda, not social benevolence.

The socio-economic playground shifts continually and at a pace that is reminiscent of modern computer games where speed and flexible responsiveness to unexpected factors are key ingredients to success. This is also true of the financial markets where fundamental values are affected by more than the local scene.

We can no longer view the markets as separate entities. As you look at the live Dow Jones charts and try to figure out what level it is reaching for you are already too late in your decisions.