Gold News

Multinationals 'bail out' US stocks

Yesterday (October 2nd) saw the Dow Jones Industrial Average fall 40 points to finish at 14047.31, sobering news for financial markets after Monday's record showings.

Yearly figures do show the Dow to have risen 13 per cent to date, with Nasdaq bettering this on 14 per cent, but potential problems may lie in the origin of new rallying investments.

The Financial Times said today that multinational companies were behind the current US stock market rally, quoting the comments of Bank of America chief strategist Joseph Quinlan, who said: "2007 will go down as the year the rest of the world saved America."

Investment from profiting multinationals serves to highlight the weakness of the dollar, which has allowed a rally of global firms to pick up cheap US shares, while US retailers like Wal-Mart remained burdened by concerns of weak consumer spending at home.

Further exacerbation of dollar weakness against other currencies was risked by the Fed's decision to cut the interest rate by 50 basic points in mid-September, in an attempt to ease credit problems.

With conditions for investment as such, companies with large overseas operations have upped their stock market positions and in doing so hauled the Dow Jones and other indexes into positive territory.

But with such shaky foundations and fundamental problems of dollar weakness and consumer reluctance unanswered in the US economy, the stock market rally could be shortlived.

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