Monthly Briefing on the World Economic Situation and Prospects, No. 36

Stock markets worldwide ended September with the largest quarterly loss since the final three months of 2008, after the collapse of?Lehman Brothers bank. The recent fall has been driven by a combination of factors, including the fear of a double-dip recession in?developed economies, concerns about the contagion of the sovereign debt problems of a number of European countries, and unease?about lack of effective policy action in major economies to deal with these problems.?Equity prices in major developed markets declined by about 15 per cent in the third quarter. Stocks in emerging economies suffered?even larger losses. By the end of the third quarter, emerging market equity funds had?already registered nine consecutive weeks of capital outflows.

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As a result, currencies of major emerging economies depreciated strongly against the United States dollar, reversing the previous trend?of appreciation. During the third quarter, for instance, Brazil?s real fell 16 per cent, the Russian rouble 15 per cent and the?South African rand dropped 17 per cent in September alone.?

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