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WHAT WENT WRONG WITH SHARES LAST WEEK?



THE sell-off was triggered by a relatively minor new tax issue in China but it highlighted how jittery investors are after months of rising share prices and fears over the US economy.

"The principal factors were the outlook for the US economy and a revised attitude to risk, " says Pat McArdle, Ulster Bank's chief economist.

"Riskier assets suffered while bonds rallied as investors sought greater safety.

There is potential for more unwinding but this may be no bad thing if investors are adopting a more sensible approach to risky investments.

"The other major factor was the US. The odds on a US recession are relatively long.

The global economy remains in good shape and our view is that growth will be maintained in all the main economies."

McArdle expects to see a gradual recovery in share prices, "albeit one that is tempered by a more realistic attitude to riskier investments. . . This does not preclude the occasional squall - it is unusual and not very healthy for markets to go in the same direction for extended periods - but this is preferable to a climate of incessant rain or, for that matter, neverending sun, " he says.




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