Economist cautions on equities market

Economist cautions on equities market
Wed May 6, 2009 6:47am

SINGAPORE (Reuters) - Rallying global stock markets will likely reverse trend later this year when weak earnings and economic news surprise investors, Nouriel Roubini, a well-known economist who predicted the credit crisis, said on Wednesday.

"This is still a bear market rally," Roubini told a financial seminar. Roubini is chairman of independent economic research firm RGE Monitor and professor of economics at the Stern School of Business at New York University.

He gave three reasons why investors ought to be cautious about the rally that has seen the Dow Jones Industrial Average .DJI rise 27 percent in two months and taken Asian stocks 42 percent higher over the same period.

Roubini expects macroeconomic news to be worse than expected, lower than expected earnings, and more bad news from the banking sector or an emerging market crisis.

"We will discover soon enough there are a lot of financial shocks.

"While financial markets are mending, we are going to see negative surprises in the next few quarters," he said.

"Markets are getting ahead of themselves."

(Reporting by Vidya Ranganathan and Kevin Lim; Editing by Tomasz Janowski)

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