Stock exchanges across the globe are being plagued by volatility owing to concerns over growth, rising inflation and the outlook for interest rates -- particularly in the US, the world's biggest economy.
Rising interest rates, to keep inflation in check, increase debt, crimp economic growth and are the Achilles heel of stock markets.
Over the past few weeks investors have taken flight, wiping billions of dollars off equity markets and in some cases eroding all the sharp gains made in this year.
The plunge has cast a shadow over the gradual stock market advances made over the past three years, according to analysts.
The Vix and VCDAX indices -- which measure market volatility in the US and German stock markets respectively -- both recently struck two-year peaks.
The Indian markets have proven particularly volatile, enduring a brutal two-week correction during which the benchmark Sensex index shed nearly 2,800 points or 22 percent, to touch an intraday low of 9,826.91 on May 22.
"With the latest downward spiral in the stock markets around the world, we believe the dynamics of equity investing have taken a turn for the worse," said Mark Arbeter of ratings agency Standard and Poor's.
"We do not see a major problem in the short to intermediate term, but we do see trouble later this year. We think volatility is back and here to stay, and in our view, this is a big negative," he said.
On the back of global economic woes, London's FTSE 100 index slumped to an intra-day five-year low of 5,510.50 points on May 22, erasing all of its gains won in this year.
A month earlier, on April 21, the FTSE had closed at 6,132.7 points -- the best finish since Feb. 15, 2001 -- as energy and mining groups were lifted by record commodity prices.
According to Michael Taylor, of Threadneedle Investments, falling share prices will eventually bring bargain hunters back to global stock markets, in order to reap profits in the longer term.
"The only things that have changed are share prices," he said of the recent stock movements. "We have seen a mid-cycle correction which, in time, will be seen as a buying opportunity."
Share prices across Europe and Asia nonetheless staged a modest rebound toward the end of last week.
"The outlook for the global economy appears strong and, fundamentally, we believe European equities remain attractive," added Lars Kreckel, an analyst with Dutch banking group ABN Amro.
However, dealers said not all the anxiety had abated in the wake of last month's rout, with investors in the sidelines awaiting further signs on the state of the US economy.
Meanwhile, analysts are also fearful of a new speculative bubble in both the commodity sector, amid record price levels, and in emerging economies such as China and India.
Kreckel meanwhile said that the current climate of weaker share price levels would encourage merger and acquisition activity.
"The fundamental case for more merger deals remains as strong as ever, and that, after the sell-off has lowered prices in some areas, could attract increased interest from corporate and financial buyers," he said.
Prior to plunging, world stock markets struck multi-year high points during the first half of this year amid healthy company earnings, positive data and a stream of takeover news.
But the recent global sell-off was sparked on May 10 when the US Federal Reserve raised its benchmark rate and left open the possibility of further rate hikes, unnerving investors who believed the current US interest rate hike cycle was nearing its end.
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