Rewind the movie to before the stock market lows of March 9: stocks down, corporate bonds down, commodities and gold down, emerging-market currencies down, safe havens in fashion, including the US dollar and government bonds. In short, risky assets closed sharply lower over the past few days as concerns mounted over the outlook for central bank policy and the sustainability of the global economic recovery, with investors only warming momentarily to the US emerging from recession as shown by the third quarter GDP report (announced on the eightieth anniversary of Black Tuesday, October 29, 1929).

Cameron Brandt, senior analyst of fund tracker EPFR Global, said (via the Financial Times): “Good corporate earnings -- viewed in recent weeks as fuel for a sustained recovery -- are currently being regarded as ammunition for policymakers looking to close the fiscal and monetary stimulus taps.”

Adding to the economic uncertainty, Chuck Butler of the Daily Pfennig, highlighted a study by Peter Bernholz (Professor of Economics in Basel) in which he analyzed the world’s 12 most important periods of hyperinflation and discovered that the tipping point occurred when deficits amounted to 40% of the expenditures. “For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses,” said Butler.

The CBOE Volatility Index (VIX) is a measure of the implied volatility of S&P 500 Index options, with very low numbers indicating extreme bullishness and very high numbers severe bearishness. It's also referred to as the “fear gauge” of US stock markets and is used as a contrary indicator as it moves inversely to equity prices. As shown below, it's noteworthy that the VIX has surged by 48.3% during the past seven trading sessions to its highest level since early July.



The past week’s performance of the major asset classes is summarized by the chart below. The numbers indicate an all-change pattern in the performances from the past few months as risk aversion reentered financial markets and investors moved money from stocks and commodities into government bonds and the US dollar.



A summary of the movements of major global stock markets for the past week, as well as since the October 19 peak and various other measurement periods, is given in the table below.

The MSCI World Index and the MSCI Emerging Markets Index declined by 4.1% and 5.5% respectively during the past week, resulting in the World Index being down 1.8% for the month of October and the Emerging Markets Index recording a zero return. As far as individual markets are concerned, Sweden and New Zealand were the only major markets closing the week in the black. However, a number of markets (mostly emerging) managed to see the month out with positive returns.

The US indices closed down for the second consecutive week, yo-yo-ing during the course of the week, but with a particularly ugly close (on steep volume) on Friday, marking the worst day in the case of the Dow Jones Industrial Index and the S&P 500 Index since the beginning of July. The benchmarks recorded their first loss-making month since February, with the exception of the Dow Jones Industrial Index that was unchanged from September.



Top performers among stock markets this week were Ecuador (+4.2%), Sweden (+1.2%), Bangladesh (+1.2%), Kenya (+1.1%), and Uganda (+1.0%). At the bottom end of the performance rankings countries included Peru ( 9.5%), Ghana (-8.9%), Ireland (-8.9%), Cyprus (-7.9%), and Argentina ( 7.9%).

Of the 99 stock markets I keep on my radar screen, only 15% recorded gains, 84% showed losses, and 1% remained unchanged. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)