Business World

Many stock indexes worldwide are expected this year to suffer their first overall drop in six years but there is still scope for a significant bounce from the steep falls suffered so far, based on the belief that any U.S. recession will be short, a Reuters poll showed on Tuesday.

Global surveys of around 130 equity strategists and fund managers conducted last week and published on Tuesday showed all median forecasts for end-2008 from Taipei to Toronto were downgraded, and by as much as 25 percent.

But given that major stock markets are already down sharply this year, the poll results also promised across-the-board gains from current levels by year-end, from just 3 percent on the Toronto S&P/TSX to 28 percent on Mumbai’s BSE Sensex.

The surveys were taken before financial markets were hit on Monday with the weekend news of JPMorgan Chase’s firesale purchase of investment bank Bear Stearns in a move orchestrated by a US central bank that again relaxed its own lending standards.

And risk aversion is rising no teletrak payday loans. Volatility hit a five-year high on Monday, according to the Chicago Board Options Exchange volatility index .VIX.

But many are looking ahead to the end, particularly given how aggressively the U.S. Federal Reserve has already slashed interest rates — and is expected to do more later on Tuesday.

“After reaching a low around the middle of the year, equity markets are expected to rebound on expectations that 2009 will be better for global growth and on an end to the steady drip of bad news from the financial system,” said Tony Dolphin at Henderson Global Investors.

Eight of the 13 indexes covered are expected to be down on the year, while five are expected to rise modestly. Back in December when the last poll was conducted the prevailing view was that the worst of the credit crunch would have passed by mid-year. 

Read more