world economy

Next year may bring yet another recession with protectionism causing major problems, says Roger Nightingale, strategist at Pointon York.

"If the … world economic cycle is going to be turning down in the second half of 2011 and if in addition to that you get tight money, we could get a fairly steep downturn. We could have another recession," Nightingale said.

In a fight against inflation many countries across the globe are starting to tighten liquidity, Nightingale said after China raised its key interest rate over the weekend.

On concerns of adverse impact of the US Federal Reserve’s further steps to more ease its monetary policy on the global economy Singapore let its currency rise sending Asian stocks and copper to two-year peaks and gold to a record high. This resulted in a sharp decline of dollar price against a basket of currencies which heated global currency tensions that have sparked a war of words among policymakers. The dollar dropped to a new 15-year low against the yen.

According to European Union Chamber of Commerce in China report, the country’s overcapacity is a long-standing disaster in China. Moreover, excess capacity has affected ever more destructively in terms of global financial slump.

 Thus the report concludes, China needs far-reaching structural reforms to root out industrial overcapacity, which is doing untold damage to domestic growth and the global economy.

 Roger Nightingale, economist at Pointon York, made a statement that the world will inevitably be involved into another depression if the stimulus measures are ceased too soon.

On the other hand, Charles Lemonides, Chief investment Officer at Valueworks LLC, notes that the stock markets will likely survive the tough times without significant problems as economic activity is better than it was six months or a year ago.

"I think the economy is in a great deal of trouble," Nightingale told "Worldwide Exchange."

 CEO of the world’s second largest retailer chain Carrefour, Lars Olofsson, stated that there are not yet any significant signs of economic recovery across the globe.

"I don't see any significant signs of an immediate change. The only part of the world where they are still dancing the samba is Latin America," Olofsson said.

 The International Monetary Fund said Thursday that the global economy is recovering faster than expected - but warned governments against premature withdrawal of stimulus efforts.

The positive report card was likely to feed a cautious but widespread relief that - despite continuing unemployment woes and halting efforts to improve regulation of financial markets - the downturn is easing and may prove less devastating than initially feared.

According to the Merrill Lynch Survey of Fund Managers for May, seven out of ten investors predict the world economy will improve in the next twelve months. Supported by positive expectations on corporate profits, portfolio managers are putting their money to work. Average cash holdings have fallen to 4.3 % from 4.9 % in April. Equities are more popular, especially cyclical sectors.