Stock market volatility continues

Global interest rate fears and uncertainty over economic growth prospects are beginning to take their toll on share markets the world over. Last week was particularly brutal with sharp declines across all major indexes across the globe. This volatility appears to be continuing this week with more heavy falls already underway.

Ten days that shook the world's markets

"From Stockholm to Tokyo, New York to Istanbul, market mayhem swept across the world last week, unleashing violent movements on stock markets and foreign exchanges everywhere, and hammering down the price of commodities such as copper and gold."

"Stephen Lewis, of bankers Insinger de Beaufort, says it's too early to write off the risk that the events of the past few days could be the trigger for a full-blown financial crisis. 'Volatility rises, to the extent that it has in equity and commodity markets in recent days, when emotions take over; when actions in the markets are forced; when survival is at stake. In such circumstances, there can be no reliable forecasts of how far markets will move,' he warned."

"The worldwide wobble started with the dollar. A warning from G7 finance ministers last month about imbalances in the global economy, and a hint from Federal Reserve chairman Ben Bernanke that he might halt the rise in interest rates, brought the greenback bears out of hiding, and triggered a frenzy of selling."

"Through the fog of market panic last week, analysts said it was important not to forget the underlying economic causes of the upheaval. For several years now, economists have been watching with growing alarm as the US spent more than it earned, running up a record current account deficit with the rest of the world - worth almost 7 per cent of GDP last year."

"This economic story will play out over months, not at the breakneck speed of the financial markets, and it is hard to predict how its ramifications will ripple across the world. 'There's no new trend established yet,' said HSBC's Bloom. 'It's an unsettled time.' But Bernanke, whose hands are on the world's most important economic lever, will have to hope he isn't forced to win the confidence of the markets the way his predecessor, Alan Greenspan, did - by stepping in to stop the stock market crash of 1987 turning into a global financial crisis."