Readers looking at this week's mild recovery in asset prices should be cognizant of this risk. I expect further downturns for US equity markets in coming weeks and months; it is likely that the widely watched Dow Jones average will close this year below the level of 10,000 from about 12,200 currently as investors adjust downward their earnings expectations as well as the multiple of earnings they are willing to pay for owning shares. In turn, this would prompt declines in other stock markets around the world, particularly in South America, whose economy, if not its politicians, depends almost entirely on US economic growth.

In past crises, such as the 1987 stock-market crash or the recession in the early 1990s that sank the administration of president George H W Bush, the US could depend on the munificence of strangers. In particular, the world's sole superpower attracted enough money from risk-averse investors to refloat its economy.

That time has, however, come and gone as developing countries no longer "need" to buy US government bonds. Indeed, as I argued in a previous article ... they are better served by investing in physical assets such as commodities directly rather than diverting their savings to the low-return US markets. In addition to the economic rationale of protecting their own growth, the world's investors are also not interested in US assets for political reasons. A quick look at the world's largest repositories of savings shows the extent of the problem: Middle Eastern investors will buy anything as long as it is not American, while Asian investors are likely to be scared off by recent losses on mortgage holdings. Other countries such as oil-rich Venezuela and Russia explicitly use their reserves as diplomatic tools.

The world's biggest bond fund has cut its holdings of US government-related debt to zero for the first time since early 2008 in the latest sign of increasing investor expectations of rising interest rates.

The move by the $237bn Pimco Total Return fund follows warnings by its fund manager Bill Gross of rising bond yields as the US Federal Reserve nears the end of its massive bond buying programme, known as quantitative easing, or QE2. Such rises would hit the value of holdings of bonds as their price move inversely to their yields.

Mr Gross, one of the most influential figures in bond markets, said in his March investment outlook that Pimco estimated the Fed has been buying 70 per cent of annualized issuance of Treasuries since QE2 began - a programme he last year likened to a Ponzi scheme.

Meanwhile, foreign investors have been buying the remaining 30 per cent. Mr Gross said as a result there was a risk of a temporary void in demand once QE2 is scheduled to end in June. "Yields may have to go higher, maybe even much higher to attract buying interest," he said.

Saudi Arabia's King Abdullah boosted spending on housing by 40 billion riyals ($10.7 billion), and earmarked more funds for education and social welfare amid popular uprisings sweeping the Arab world. The social security budget was raised by 1 billion riyals, according to a statement read on state-run television. King Abdullah also ordered the creation of 1,200 jobs in supervision programs and made permanent a 15 percent cost-of-living allowance for government employees, according to the statement.

Saudi Arabia, the world's largest oil supplier, is spending more on social programs as political unrest roils the region. Governments in Bahrain, Yemen and Libya have cracked down on activists calling for greater job opportunities and political openness after uprisings toppled leaders in Tunisia and Egypt.

Eyewitnesses in Qatif said that police tried to disperse about 300 protesters in the city late Thursday afternoon. When the demonstrators refused to leave eyewitnesses said the police fired on them with rubber bullets and percussion bombs.

Three demonstrators were injured and were later taken to Qatif general hospital, according to a protesters.

There have been a smattering of protests in Saudi Arabia's Eastern province, where most of the kingdom's Shi'ites live, since February 17. Protesters have been calling for the release of nine prisoners that they said have been held without trial since 1996. A delegation from Qatif held a meeting with King Abdullah on Wednesday to ask for their release but the outcome of the meeting was unclear.

However, Thursday's demonstrations are thought to have been calling for their release. A "Day of Rage" has been called for across Saudi Arabia on Friday.

On Tuesday the government sought to ease tensions by releasing 25 Shi'ites arrested during recent demonstrations. Sheikh Tawfiq al-Amir, a prominent Shi'ite cleric detained after a sermon in which he called for reforms, was also released earlier this week.

France is talking to its allies about targeted air strikes on Libyan airfields and has recognized a leading opposition group in a bid to rally the international community against Muammar Gaddafi's regime.

In an attempt to stiffen the resolve of other European Union leaders ahead of a summit on the Libyan crisis in Brussels on Friday, the French government on Wednesday suggested its international partners should consider more flexible and rapid military responses to the escalating violence.