Tuesday, 28 April 2009

Nikkei and DAX suffering most in fear of flu pandemic

Charts today for The Nikkei 225 and the DAX in Germany shows that the leading export based economies would perhaps be most immediately affected if a flu pandemic causes further consumer retrenchment. This would only augment fears that any recovery in business momentum, already somewhat fragile, would have even more adversity to contend with.

This adds additional emphasis to the point that I was making in one of my posts yesterday about the weakness in the Larry Summers' notion that economic crises can be separated into discrete episodes. The point is not so much that swine flu may turn into a pandemic - let's certainly hope that it doesn't - but rather that once a system becomes vulnerable and exposes a weak link there is a danger that some other de-stabilizing factor will emerge to prolong and accentuate the crisis.

The chart above for the Nikkei is not looking at all constructive at present with a break down from the uptrend in place since early March now clearly visible.

Should the Japanese index fail to find support around the 8300/8400 level this could trigger a rather abrupt drop to lower levels last seen in March.

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