Business commentators are firmly focused on stagnation – and stagflation. In the Fin Review, David Bassanese says fears of a return to the ugly bear market of four years ago have been ignited by the drop in equity prices in recent days. The worst case scenario, concludes Bassanese, would be stagflation, where growth might slow even as inflation pressures rise due to higher labour and raw material costs. And in The New York Times, Paul Krugman says that while it was the fear of stagflation that sent stock prices to a five-month low last week, a mild form of stagflation has already arrived.

The Australian ’s Robert Gottliebsen says fundamental global changes are behind the international sharemarket correction – in particular changes in the US, China and Japan – but says it’s important for Australians to realise that what has happened in our market is a well overdue correction. And colleague Bryan Frith says that while there’s growing support for the view that the market is nearing its bottom, there’s not much support for the likelihood of a rapid bounce back. Instead a sideways move is more likely for the next two or three months.
Stephen Bartholomeusz in The Age rejects Peter Costello’s suggestion that the markets are taking a “breather” after a massive run, and instead looks at the fundamental forces at play, arguing that “the vague threat the hedge funds were seen to pose to the stability of financial markets and real economies may be materialising, with unpredictable but presumably fairly unpleasant consequences”.

Meanwhile, The Fin reports that after 49 years as a passive advertising medium, television commercials will go interactive for the first time on Sunday night with the launch of CBA and Toyota’s interactive ad campaigns on Foxtel digital pay TV service. Viewers will be able to press a red dot on their remote to access extra information.

And on Wall Street, the Dow closed down 16.26 points, to a new low for the year, reports the NY Times.