Soros
spies trouble on financial markets horizon
AFP
DAVOS, Switzerland
Petroleumworld.com 01 30 06
Geopolitical tensions, tight energy markets and a likely US economic
slowdown toward 2007 will cast a cloud over financial markets
this year, financier George Soros said Saturday.
Speaking at the World Economic Forum, Soros argued that "an
unexpectedly strong decline in America's influence in the world"
had contributed to the crisis over Iran's nuclear ambitions, underpinning
high oil prices.
"I see the Iranian crisis slowly maturing, and usually political
developments don't affect markets very much, but in this case
they may," he said, adding that "2006 is a dangerous
year as far as oil is concerned".
High oil prices could prompt Ben Bernanke, the incoming chairman
of the US Federal Reserve, to pursue further interest rate tightening
this year, and Soros forecast at least one more increase.
"He also has to establish his credibility" as an inflation
hawk with markets to meet a standard set by Alan Greenspan over
his 18-year term as Fed chairman.
That would contribute to a slowdown in the surging American housing
market, Soros said, and households which have driven US economic
growth in recent years would begin to spend less.
"As the housing boom cools off, the savings rate is likely
to rise, and that will lead to a shortfall in demand that I think
will bring a global slowdown," Soros said.
"I expect a slowdown in 2007, which will probably cast its
shadow over the markets in 2006."
The dollar might not suffer from a slump immediately however,
because higher US interest rates than in Europe or Japan would
continue to attract foreign capital, he added.
"That doesn't mean that the dollar is about to fall out of
bed, because the interest rate differential is still there, and
it may still be rising," he said.
AFP
01/28/06
Copyright
© 2006 AFP. All rights reserved
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