ANALYSIS-Optimism stalls amid second thoughts on recovery

ANALYSIS-Optimism stalls amid second thoughts on recovery

Reuters News
USA-MARKETS/REVERSAL (ANALYSIS)

By Steven C. Johnson

NEW YORK, June 23 (Reuters) - After months of wishful thinking, investors are nervous again about financial markets and the world economy, and it may take a flurry of much better economic data to make them believe in a sustainable recovery.

Anxiety grew on Monday after the World Bank cut its 2009 global growth forecast, saying the world economy will contract 2.9 percent this year.

That added to a decline that has hit major markets identified with increased risk -- global stock markets, currencies such as the euro, and oil, copper, gold and other commodities.

All three recently hit multi-month highs -- U.S. stocks surged nearly 40 percent from a bear market low hit in March -- as markets bet the worst of the global financial crisis had passed and the world recession was easing.

But these moves stalled this month, leaving the benchmark S&P 500 in the red for the year at Monday's close.

The dollar has also clawed back some of the losses suffered when growing optimism sparked investors to buy the euro and higher-yielding, commodity-linked currencies such as the Australian dollar instead, while U.S. bond yields have retreated from this month's eight-month highs.