| World stock markets under pressure |
Updated at: 2122 PST, Monday, October 27, 2008 NEW YORK: Recession fears sent world stock markets tumbling Monday, with Tokyo at a 26-year low, Europe badly under water and Wall Street struggling to hold the line despite a G7 pledge to stabilise the financial system.Oil prices fell below 60 dollars as traders estimated that a global recession would dent future energy demand. The European single currency sank under 1.24 dollars to a two-year trough after a downbeat survey on German business confidence pointed to a likely recession in the eurozone's biggest economy, analysts warned. Markets were also shaken after the IMF unveiled rescue plans for Ukraine and Hungary, South Korea cut interest rates, Japan announced action to boost its stock market and Australia's central bank intervened to prop up its currency. "There seems to be no end to the panic in the markets with recession fears now topping investor concerns," said Dresdner Kleinwort analyst Valentin Marinov. CMC Markets dealer Matt Buckland said that "after last week's turmoil in equity markets, many had been hoping that the new week would bring about a degree of stability but ... so far there's little to suggest this will be the case." US stocks opened weaker Monday, with the Dow Jones Industrial Average sliding 1.01 percent to 8,294.52 points but then recovered to inch into positive territory in volatile trade. "It is fear that is driving the market and the prevailing fear now is that 2009 earnings estimates will need to be marked down considerably as global economies retrench," said Patrick O'Hare at Briefing.com. "Another fear the market can't shake is the fear of forced selling by troubled hedge funds." Japan's Nikkei index plunged 6.36 percent, striking its lowest level since October 1982, on fears that emergency steps by world governments will be too late to prevent a worldwide recession. Hong Kong lost 12.7 percent in the biggest single-day drop since 1991 as investors dumped stocks. The fresh equities turmoil came despite a pledge by the Group of Seven major economies to cooperate to bring stability to the global financial markets. In Europe, London dived to a five-year trough as the market continued to digest news that the British economy was on the brink of recession after negative growth in the third quarter. In morning deals, London's FTSE 100 index of top shares plunged 5.62 percent but later pared losses to 1.83 percent. Paris shares were down 3.79 percent in mid-afternoon trade while the DAX in Frankfurt shed 2.23 percent after steeper falls in earlier trading. German business confidence dropped to its lowest point for more than five years in October, a key survey showed, as the economy reeled from the international financial crisis. The monthly business climate index calculated by Munich-based economic research institute Ifo fell to 90.2 points in October from 92.9 points in September for its fifth straight drop and its lowest level since May 2003, when it reached 89.6 points. "Germany is heading for a serious recession," warned Bank of America senior economist Holger Schmiedling in response to the Ifo data. "With business confidence declining at a record pace, the economy looks set to shrink noticeably in late 2008 and early 2009." The Group of Seven nations -- comprising Britain, Canada, France, Germany, Italy, Japan and the United States -- sought to calm nerves by affirming their "shared interest in a strong and stable international financial system." At the same time, they voiced concern about "excessive volatility" in the yen, which Friday soared to a 13-year high against the dollar as worried investors fled to the relative safety of the Japanese currency. Japanese Prime Minister Taro Aso announced fresh measures to support the ailing stock market, including a bigger government fund to pump capital into banks if needed. The renewed stock market turmoil came as the International Monetary Fund moved to bail out Ukraine and Hungary which have suffered badly. Markets expect fresh steps by global authorities this week to try to stabilise shaky markets, with the US Federal Reserve widely anticipated to cut interest rates on Wednesday, leading the way for others to follow. |
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