Markets sink as investors panic over recession threat
Written by Writer on Saturday, October 25th, 2008
Markets sink as investors panic over recession threat
LONDON: Investor panic about a looming global recession sparked massive stock market losses in Asia and Europe on Friday, as concern grew that the financial crisis was taking a heavy toll.
Tokyo lost 9.60 percent, ending below the key 8,000-point level for the first time in more than five years as the yen soared and after a profit warning from tech giant Sony.
And the Hong Kong market closed with a loss of 8.3 percent.
“Volatility and uncertainty seem to be the watch words at the moment,” said CMC Markets trader Matt Buckland in London.
“Asian markets have again been under pressure overnight whilst there’s also a degree of concern surrounding the corporate forecasts that came out from across the Atlantic last night.”
European equities spiraled lower, with London diving 5.51 percent ahead of vital data which was expected to reveal that Britain’s economy shrank in the third quarter for the first time in 16 years.
“Rumors are flying that the [growth figure] will come out negative, putting more pressure on the UK government to help out the economy,” added BetOnMarkets analyst David Evans.
Elsewhere, Frankfurt tumbled as much as 6.71 percent and Paris was down about five percent in early morning trade, before European markets trimmed their losses somewhat.
The yen soared to a 13-year high against the dollar and to a six-year peak against the euro as investors took shelter from the latest storm lashing global financial markets.
The European single currency meanwhile tumbled underneath 1.27 dollars, hitting a two-year low on expectations of eurozone interest rate cuts and slowing economic growth, dealers said.
“The best word to describe what’s going on right now is panic,” said Credit Suisse strategist Satoru Ogasawara. “When you don’t know what will come next, you tend to flee to the safest place.”
South Korean shares dived 10.6 percent—a day after a 7.4 percent plunge—after the domestic economy grew at its slowest pace for four years and Samsung Electronics reported a sharp drop in quarterly profit.
“The market seems to be still in panic,” Lee Kyung Soo, from Taurus Investment & Securities, told Dow Jones Newswires in Seoul.
Sydney ended with a loss of 2.6 percent, while Hong Kong was down nearly seven percent in the afternoon session.
The sell-off came as Asian leaders meeting in Beijing agreed to set up an 80-billion-dollar fund to fight the global economic crisis.
The deal between South Korea, China, Japan and the 10 members of the Association of Southeast Asian Nations is the first major coordinated regional action since the full force of the financial turmoil erupted last month.
In Australia, three big investment firms said they had frozen at least 3.66 billion US dollars’ worth of investors’ funds to stem an exodus sparked by a government deposit guarantee.
The rout supported the yen, particularly against higher-yielding currencies such as the euro, the Australian dollar and the British pound.
The dollar fell to 95.32 yen, its weakest since August 1995. The euro slipped below 123 yen for the first time in almost six years as investors unwound risky bets funded with cheap Japanese credit.
The stronger Japanese currency is bad news for exporters such as Sony, which warned it now expects its annual profits to drop by more than half.
Governments around the world have pumped cash into the banking system in recent weeks to try to contain what former Federal Reserve chairman Alan Greenspan described Thursday as a “once-in-a-century credit tsunami.”
While there have been some tentative signs of an easing of the credit crunch, concerns are growing about the worsening outlook for economic growth and corporate earnings.
“The theme of weaker global growth has replaced the issue of troubled banks for now and continues to weigh on investor psyches,” said analysts at UBS.
Wall Street’s share indexes closed mostly higher Thursday in a volatile session.
“But it was only a marginal gain after massive selling. The direction of global markets has not changed,” said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp. in Tokyo.–AFP
The Manila Times
Saturday, October 25, 2008
