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Credit crunch having ‘profound impact’

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The credit crunch is having a marked effect on the global economy, Michael Gordon, head of investment strategy at Fidelity International has said.

Speaking about this week’s stock market turbulence, Gordon said the two primary causes were the growing consensus that the US economy is moving into recession and the emerging difficulties among bond insurers, with deals done when credit was readily available beginning to unravel. He also said the likelihood that Asia and China would be able to bail out the developed markets now looks less likely.

He added: “My suggestion is that investors do nothing: history shows that this is usually the best course of action in such situations. How will the market end the year? By Christmas, I forecast that UK equities will finish 10% lower than they started the year. The FTSE 100 Index has already fallen by almost 15% since 2 January .”

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