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Stocks fall worldwide on emerging-market fears

Published on NewsOK Modified: January 27, 2014 at 6:01 pm •  Published: January 27, 2014
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NEW YORK (AP) — Stock markets fell across the globe on Monday, but at least it wasn't another rout on Wall Street.

Shaky economies and plunging currencies in the developing world fueled a worldwide sell-off as fearful investors pushed prices lower across Asia and Europe.

In the U.S. and other rich countries with healthier economies, investors also retreated, although the selling was more modest.

Major indexes in both Hong Kong and Tokyo fell more than 2 percent. The selling then spread to Europe and the U.S., as stocks slipped across the board, but the declines were much less than on Friday, when the U.S. market ended its worst week since 2012.

Jack Ablin, chief investment officer at BMO Private Bank, said he was encouraged that the U.S. losses were limited.

"We have an accelerating economy, low inflation and accommodative monetary policy," he said. "The world isn't falling apart."

The Dow Jones industrial average slipped 41.23 points, or 0.26 percent, to 15,837.88. The Standard & Poor's 500 index fell 8.73 points, or 0.5 percent, to 1,781.56. The tech-heavy Nasdaq was down the most in the U.S., falling 44.56 points, or 1.1 percent, to 4,083.61.

The market turbulence was set off last week by a report from China on a downturn in its manufacturing, more evidence that the world's second-largest economy is slowing. That's a big problem for Brazil, South Africa and other developing countries that have come to depend on exports to that country.

Adding to the troubles: The decision by the U.S. Federal Reserve last month to scale back its bond-buying stimulus for the American economy, which has helped keep interest rates low. Money that had flooded emerging markets looking for higher returns outside the U.S. has begun to come back now that rates may rise, battering those markets.

Despite Monday's widespread selling, experts say the troubles in China and elsewhere in the developing world are unlikely to derail a global economic recovery that appears to be gaining momentum. Growth in the world's wealthy economies is expected to pick up the slack.

"This year, growth will be driven by the dull and old economies — the U.S., the U.K., Germany and even Japan," said Nariman Behravesh, chief economist at IHS Global Insight.

The International Monetary Fund expects the global economy to grow 3.7 percent this year, up from 3 percent in 2013, carried along by faster growth in the United States and the 17 countries that use the euro. The IMF expects China's growth to decelerate from 7.7 percent last year to 7.5 percent in 2014.

"A lot of growth is shifting back to the developed world," said Jennifer Lee, senior economist at BMO Capital Markets.

Compared with a couple of years ago, the U.S. economy is in a better position to withstand a Chinese slowdown. American consumers have paid down debts and can spend more freely. The housing market is recovering from the depths of the Great Recession.

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