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 Markets tumble in Europe and Asia; traders look to G-7 in desperation

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CovOps

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Markets tumble in Europe and Asia; traders look to G-7 in desperation Vide
PostSubject: Markets tumble in Europe and Asia; traders look to G-7 in desperation   Markets tumble in Europe and Asia; traders look to G-7 in desperation Icon_minitimeFri Oct 10, 2008 9:14 am

PARIS: Global stocks plummeted Friday after the rout a day earlier on Wall Street, where the Dow Jones industrial average lost more than 7 percent, and investors were desperately looking to global financial authorities meeting later in Washington for new measures to stem the turmoil.

Markets tumble in Europe and Asia; traders look to G-7 in desperation Uk550zr8
A pedestrian walks past a computerized display showing the FTSE 100 index in London Friday. The index of leading British shares plunged 7.1 percent in the first half hour of trading Friday morning, tracking steep declines in Europe, Asia and the U.S.

"We are fighting really dire fundamentals," said Gerhard Schwarz, an equity strategist at Unicredit in Munich. "It will require restoring trust and confidence before a sustained rebound will be possible."

European markets fell more than 10 percent at the opening, but came off their lows a bit later. Just before midday in Paris, the DJ Euro Stoxx 50 index, a barometer of blue chips in the euro zone, was down 9.7 percent. The FTSE 100 index in London was down 7.5 percent, the CAC-40 in Paris was 8.7 percent lower, and the DAX in Frankfurt was down 9.8 percent.

Shares in Asia also plunged. The Nikkei 225 stock average — already reeling from a nearly 10 percent drop Wednesday — slumped 9.6 percent on Friday, closing at 8,276.43.

Trading in United States index futures suggested the Dow would fall about 3 percent at the opening bell. On Thursday, the Dow fell 678 points to 8579.19, its first close below 9,000 since 2003, as stocks were routed in an aggressive final hour of selling.

"The fear indexes are dramatically high," Schwarz noted, pointing to measures of volatility that were near record highs. "We are seeing intraday volatility this week of 7 percent to 9 percent in Europe."

With the wide trading range that have sent shares from deep in negative territory into positive territory and back this week, "We don't know where we'll be in just a few hours," he said.

Concerns that a global recession could slow demand for oil caused prices to plunge below $82 per barrel on Thursday. The International Energy Agency, citing a "spiraling liquidity crisis," cut its oil demand growth forecast for the rest of 2008 to its lowest rate in percentage terms since 1993, Reuters reported.

In Asia, the Japanese benchmark index has given up more than 25 percent of its value this month.

The Hang Seng index in Hong Kong fell 7.2 percent on Friday, while the ASX/200 index in Sydney closed 8.3 percent lower.

Japanese investors dumped shares after Yamato Life Insurance, an unlisted mid-sized insurer, filed for bankruptcy. An unrelated real estate investment trust, New City Residence Investment, also filed for protection from creditors.

In Seoul, the Kospi index fell 4.1 percent. The Shanghai composite index fell 3.6 percent, giving it a loss for the week of about 15 percent. The Indonesian stock exchange suspended trading for a third day, and exchanges in Bangkok and Vienna halted trading after shares fell more than 10 percent, triggering circuit-breaker rules.

In Moscow, the Russian Duma, or lower house of Parliament, approved a financial sector bailout package valued at more than $80 billion. Trading on Russian stock exchanges was suspended until further notice.

Investors were keeping a close eye on a crisis meeting of Group of 7 finance ministers in Washington later Friday. The United States and Britain appear to be converging on a similar blueprint for stemming the financial chaos, which includes injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans.

"It is a must for the G-7 countries, especially the U.S., to make a firm commitment to public fund injections for recapitalization of banks in trouble, in order to see the stock market pull out of the doldrums," Hideyuki Suzuki, an analyst at Morningstar Japan told Reuters. "If the G-7 nations failed to do so, its raison d'être will be called into question for sure."

Credit markets remained frozen. The so-called Ted spread, which measures the gap between yields on safe three-month United States government securities and the rate that banks charge each other for loans of the same duration, was near record levels, at 4.13 percentage points, showing financial institutions remain deeply reticent about lending to their peers.

Schwarz suggested that the G-7 could help matters by, for example, moving to limit counterparty risk by having central banks insure transactions between financial institutions.

Equities were also hurt by evidence that the financial market contagion has reached the broader economy.

Singapore said its economy had shrunk 6.3 percent during the third quarter, while Ken Wattret, an economist at BNP Paribas in London, said in a research note that it was "almost unavoidable" that the euro zone economy would shrink in 2009.

The head of the International Monetary Fund, Dominique Strauss-Kahn, said Thursday that the situation was "serious and even dangerous" and criticized the European Union's responses to date as "not coordinated enough."

The IMF raised its estimate of the potential cost of the crisis to around $1.4 trillion, up from a previous forecast of $1 trillion.

On oil, OPEC has signaled it may slash output to support prices at an emergency meeting of leading oil-producing countries in Vienna on November 18.

United States crude oil futures for November delivery fell to their lowest in a year, dropping as low as $81.13 a barrel in electronic trading on the New York Mercantile Exchange.

The realignment in the currency markets continued, with major currencies falling against the yen. The dollar fell to 98.99 yen from 99.81 late Thursday in New York, while the euro fell to 134.18 yen from 135.80.

The euro fell to $1.3558 from $1.3605, and the British pound fell to $1.6880 from $1.7097. The dollar fell to 1.1205 Swiss francs from 1.1295 francs.

Schwarz said a positive bounce in the markets was almost inevitable in the next few days, after the sharp declines of the last few weeks. However, he cautioned that unless policymakers came up with a way to get borrowing costs down for corporations and consumers, any gains would likely be short-lived.

"It's going to be very difficult for companies that need to refinance debt," he said, "and this will start to show up in the next month." Additionally, with a wave of U.S. adjustable-rate mortgages about to reset in the next few months, the authorities are eager to get rates down. The interest rates on many of those mortgages are tied to Libor, the London interbank offered rate, the rate at which banks borrow from other banks.

http://www.iht.com/articles/2008/10/10/business/11markets.php

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RR Phantom

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Markets tumble in Europe and Asia; traders look to G-7 in desperation Vide
PostSubject: Re: Markets tumble in Europe and Asia; traders look to G-7 in desperation   Markets tumble in Europe and Asia; traders look to G-7 in desperation Icon_minitimeFri Oct 10, 2008 6:21 pm

:This stuff's g :Gold:
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