Sub-prime crisis: Is it over?

When the sub-prime crisis rocked world markets on July 27, New Zealand’s sharemarket followed the same dismal path as Wall Street. It sank almost 10 per cent in less than a month.

But the NZX-50 index stopped just short of a fresh closing high on Tuesday and overseas markets have also recovered. The sorry episode appears to be fast disappearing in the rear view mirror.

However sharemarkets do not represent any country’s entire economy, and some commentators argue the fallout from sub-prime and the credit crunch that followed represents a huge change in financial fundamentals that is likely to run for some time yet.

Sharemarkets received a huge shot in the arm from the half a percentage point cut to US interest rates by the Federal Reserve Bank last month.

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