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Somber, but Optimistic

11/13/2008 10:21 am EST

Focus: GLOBAL

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

At last week’s Washington DC Money Show, the mood was serious, but also surprisingly optimistic. Advisors from both sides of the political fence expressed their hope that the new blood in Washington would help inspire a concerted global effort to stabilize world economies and markets.

Twenty nations will meet this coming weekend (November 15) to begin this work. And while optimism continues to spread, the reality is that more steps will be needed to stop the bloodshed from volatile world markets.

This week, Great Britain’s FTSE 100 continued its declining trend, closing 1.5% lower on Wednesday, as the markets absorbed a new and bleak inflation report. On the heels of last week’s 1.5% drop in interest rates, the Bank of England gave its harshest report on the British economy in more than a decade. The Bank predicted that GDP will decline sharply next year—by 2%—and inflation will come in below 1% if rates are left at their current 3% level—setting the scene for further rate drops.

It was also reported that third quarter unemployment in Great Britain hit a decade-high level, rising 36,500, to 1.825 million. The bad news continues as last month’s UK retail sales dropped by the largest percentage in more than three years, and home sales hit their lowest level in 30 years.

The FTSEurofirst 300 index of top European shares closed more than 3.4% lower also, and has lost more than 41% so far this year. Industrial production in the 15-country Euro zone fell 1.6% for the month of September and 2.4% year over year. Like in the US, companies throughout Europe are hunkering down to withstand the economic downturn.

The largest bank in Italy, Intesa Sanpaolo SpA (ISP.MI), announced that it was cutting its cash dividend to boost its financial strength. Swiss Life (SLHN.VX) also cut its dividend, curtailed its share buyback program and warned that it would miss its full-year profit guidance.

Netherlands banker and insurer ING (NYSE: ING)—after agreeing to a 10 billion euro ($12.7 billion) cash infusion by the Dutch government last month—announced its first-ever quarterly loss.

Moving on to Asia, Japan saw its exports tumble by 10% and its corporate bankruptcies soar by 13.4%, year over year. India and South Korea also posted significant declines in their exports. The lone bright spot was China, whose trade surplus hit another record in October, rising 20% to $35.2 billion. However, that doesn’t alleviate the country’s softening demand and economy. The government of China just announced an Rmb4,000 billion ($586 billion) spending plan for infrastructure and social welfare over the next couple of years.

The Nikkei was down 1.3% on Wednesday, while Hong Kong’s Hang Seng fell 0.7%. A Reuters poll revealed that half of the economists it recently surveyed believe that a recession in Hong Kong may have begun in third quarter.

Meanwhile, the World Bank said it expects to increase its lending to $35 billion this year, up from $13.5 billion last year, including aid to Mexico, Indonesia, and Colombia.

The still-positive news for consumers is oil’s continuous fall, now trading at about $58, 20-month low. At least we have something to smile about!

And while this holiday season may not be as jolly as previous years, we long-term investors have plenty of time to construct a wish list for investments for the market’s eventual recovery.

In this week’s Global Q&A, Daniel O’Keefe, portfolio manager of Artisan International Value Fund and portfolio co-manager of Artisan Global Value Fund, shares his strategy for long-term investing in undervalued companies.

Chris Gilchrist, editorial director of Every Investor, brought us up-to-date on Great Britain’s economy and markets.

Roger Conrad, editor of Canadian Edge, analyzes a high-dividend-paying oil and gas trust, while Tom Lydon, editor of ETF Trends, warns of storms brewing in commodities and the Indian economy.

I’ll be interested to hear the results of this weekend’s G20 meeting—let’s hope real actions emerge that will give a long-term boost to global markets and economies.

Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.

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