Stocks will retreat around the world because of shrinking demand from China as growth in the third- biggest economy slows, said Nouriel Roubini, the New York University professor who predicted last years financial crisis.
Global equities will fall 20 percent this year from current levels as China, which contributed 19.5 percent to total growth in 2007, contends with its slowest expansion in seven years, he said. Wall Street strategists predict the Standard & Poors 500 Index, down 8.4 percent so far, will rise 17 percent in 2009.
Roubini, an economics professor at NYUs Stern School of Business, said China already is in a recession despite government data showing a 6.8 percent fourth-quarter growth rate, as power output declines and manufacturing shrinks. Demand is falling in China, theyre over-invested in capacity and theres a global supply glut, Roubini, 50, said in a telephone interview. It has very, very important implications.
Roubinis view is shared by Societe Generale SA global strategist Albert Edwards, who was correct in forecasting in March that a U.S. contraction would spur a bear market in equities. Edwards says the China slowdown will reduce earnings at industrial, energy and raw-materials companies, sparking a selloff in emerging and developed-market stocks that may send the S&P 500 down 40 percent to 500.
