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Swine flu worries Asian markets

Apr 27, 2009

Flu to weaken economic recovery
Asian markets have opened the week on a mixed note. Optimism about improvement in the global banking and financial landscape seems to be clouded by the fear of a swine flu pandemic (originating from Mexico) that is spreading its wings across the world. As reported by MarketWatch, stocks of airline companies are trading weak across Asia on fear that the spread of the flu is expected to slow foreign travel. However, on expectations of greater demand for their products to treat the epidemic, stocks of drug makers are trading strong. In the US last Friday, government bonds rallied strongly on speculation that the battle to contain the flu will be costly enough and will slow the economic recovery. Till now, flu cases have been confirmed in the US, Canada, Brazil, Europe, and New Zealand.

Dr. Doom sees light
In a recent interview with Newsweek, Nouriel Roubini a.k.a. "Dr. Doom", the New York University professor and one of the very few who rightly predicted the collapse of the global financial system, has indicated that the pace of economic decline is going to slow down going forward.

On being asked whether the world is staring at an economic depression, he said, "I don't believe we are going to end up in a near depression. Six months ago I was more worried about an L-shaped near depression. Today, after the very aggressive policy actions taken by the U.S. and other countries, the risk of that near-depression L has been reduced from 30 percent to 15 or 20 percent. We are instead in the middle of a U."

India needs more private investments
This is what Dr. Subbarao, the RBI governor, believes. After cutting benchmark interest rates six times since October 2008 and still seeing banks not passing on the benefits to borrowers, he is now urging them to do so to encourage business spending. "To go back to 9% (GDP growth), we need the world to recover fully. Private investment demand has to pick up and banks must reduce the cost of credit," he said at a recent conference in Washington.

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