Global Financial News Sep/25/2009

The Group of 20 nations is close to an agreement that would require members to subject their economic policies to a type of "peer review," according to several senior G-20 officials, in a shift that would expose the U.S. and China to broad scrutiny of the way they run their economies. Also, the G-20 heads of state will announce on Friday that the G-20 will become the permanent council for international economic cooperation, eclipsing the Group of Eight
Global stock markets dropped Friday as leaders of the world's 20 largest economies assembled in the U.S. to find ways to foster a healthy economic recovery. European shares were modestly lower after Asian markets closed down, while the dollar fell against major currencies and oil prices gained slightly after a two-day plunge.
Twitter appears set to raise $100 million, valuing it at $1 billion; For context, that is almost double the market capitalization of Domino’s Pizza, which has 10,500 employees and had $1.4 billion in sales last year. Twitter has some 60 employees, and although it is experimenting with running advertisements on its Web site, Biz Stone, a Twitter founder, said this week at an industry confer-ence that the company had no plans to begin widely running ads until 2010.
The economic outlook for Central and Eastern Europe is improving, but important challenges remain, including ensuring that the supply of credit is sufficient to support the recovery, the European Commission said Friday.
Spain's efforts to rein in its budget shortfall by a 2012 deadline set by the European Union are being stymied because the central government in Madrid has relatively little sway over public-sector spending. Spain is to swing from a surplus of 2% of gross domes-tic product to a deficit that is forecast to top 10% this year. Under that forecast, it would be Europe's third-largest deficit in per-centage terms, behind those of the U.K. and Ireland.
In another sign the global economy is emerging from its downturn, data released Friday showed world trade volumes rose at the fastest rate in over five years in July. Trade volumes increased by 3.5% from June, the largest increase in a single month since December 2003; July trade volumes were 15.9% down on their peak in April 2008.

Correlations among Emerging and Developed Equity Markets

High volatility observed across certain markets led to leading indices moving abruptly over time. A look at the movements of different indices for the past one year revealed that markets were increasing getting interlinked and as a result major developments in one market were increasingly getting transmitted to others. This led to the inspiration in undertaking a study to see whether there is any linkage/interlinkage between developed and emerging markets and if yes, the extent of the same. An attempt is made to study the movements in global equity markets consisting of developed and emerging ones for the last one year. Analysis is done by studying the nature of return, volatility and correlation coefficients of returns between developed and emerging markets for this purpose.

Results showed that after the eruption of crisis at the epicenter US, there was an increasing spillover effect which engulfed both developed and emerging markets as evident from the above return, volatility and correlation analysis. The crisis which accentuated post the collapse of Lehman brothers during Sep. 2008 rapidly snowballed into an avalanche plunging equity markets across the globe through debilitating negative returns with sudden sharp spikes in volatility. As a fallout, correlations in returns between developed and emerging markets increased indicating high inter-linkages within equity markets.