This is going to be an interesting week for world markets. Are the sell-offs that began on Friday and continued yesterday the beginning of the end for the equity market's recovery, or just a blip in a bull run that has taken the FTSE 100 up by 30 per cent in the past six months?
We'll know better in the coming weeks, but it is already clear that markets remain exceptionally fragile. Friday's setbacks were prompted by mildly disappointing consumer confidence data out of the US, while the sell-off continued in Asia yesterday after Japan's GDP figures – despite marking an end to recession – were marginally weaker than some had hoped.
Stock market bulls ought to look at China, which has become a good signalling tool for investors in equities. It is already down 16 per cent since the end of July and is not far off falling back into bear market territory. Note, too, renewed concerns about US housing, where prices are still falling and foreclosure rates soaring.
The problem with market bull runs is that the higher they go, the more nervous people start to feel. This run has been built on the expectation of a global economic recovery – if it does not materialise soon in more convincing fashion, the falls of the past two days may be the first of many.