The recovery keeps investors waiting
The onset of summer 2001 was marked by fading hopes for an early global economic recovery. As discussed in the June 2001 issue of the BIS Quarterly Review, spring had been a time of cautious optimism in financial markets, with participants generally convinced that monetary easing by the principal central banks in the developed countries would quickly turn the global economy around. In June and early July, however, disappointing macroeconomic data from Japan, Europe and the United States, accompanied by profit warnings from European and North American companies, indicated that the slowdown was not only continuing but also spreading. Stock markets fell sharply, giving back their earlier gains and extending the correction that had begun a year before.
The general deterioration in stock markets was compounded in July by turmoil in emerging markets. News about problems in Argentina, Turkey and Poland affected equity values and currencies of a number of emerging economies, although there were also many countries that escaped these spillover effects. The contagion started to abate within two weeks as market participants again began to differentiate between countries.