2007 was a year of volatility for global financial market which was marked by weak USD, much higher energy and commodity prices and turbulence triggered by US sub-prime mortgage crisis; new emerging markets (especially China, Russia and India) were the key drivers of global economic growth and they will continue to be best performers in 2008. In 2008 US economy is expected to slow down in the first half and speed up after it has fully recovered from sub-prime problems and bad debt. We are likely to see slower growth in the developed world except the two commodity export countries (Australia and New Zealand), better performed equity markets in new emerging markets, slightly stronger dollar and higher energy &commodity prices.
Global currency markets outlook for 2008
In 2007 the dollar has fallen 13% against the Euro, 10% percent against the Japanese Yen and 8.5% against the British pound. Although oversold in 2007, the dollar won’t appreciate too much but rather rise (or even fall) slightly against the overvalued Euro, Cad, and Gbp because the Fed is very likely to cut interest rates once or twice this year to stimulate economy and an orderly declined dollar is good for US economy. Like US UK is supposed to cut interest rates while Japan will maintain its lowest interest rate due to the dormant economy and New Zealand will keep its highest one in fear of inflation. Both China and India are facing serious inflation now, if China appreciates renminbi it will be quite profitable to buy Asian currencies because other Asian countries want to raise their currency value to contain inflation and at the same time not to lose their market share to cheaper Chinese goods.
Global equity and bond markets outlook for 2008
US and European equity markets will probably remain low in the first half and rise moderately in the second half. Global emerging markets (especially Asian markets) are likely to do well. Japan’s economy remains fairly weak and its export-oriented sectors are at risk from a global economic slowdown, so its stock market is not expected to rise much.With the prospect of US inflation rising slightly in 2008, equity markets will certainly outperform bonds and cash yet by an insignificant margin.
Global commodity markets outlook for 2008
In recent years the fastest growing entities and key drivers of global economy are three manufacturing-dominant nations: China, Russia and India, that is to say, they grow by consuming energy and commodity. Since the energy & commodity supply growth will continue lagging behind the demand growth, oil, natural gas and coal prices will rise further in 2008, so will gold, silver, raw materials and agricultural produce.