World stocks plunge for second day
Pastor Dale Morgan
Wednesday February 28, 7:11 PM *
World stocks plunge for second day*
Heavy gloom on world stock markets deepened in early European trading on
Wednesday, with sharp falls in London, Frankfurt and Paris on signs of
economic slowdown in the United States and an end to a speculative
bubble in China.
London's FTSE 100 index and the CAC 40 in Paris are now trading at
levels below those seen at the end of 2006, after Europe's main stock
markets hit six-year peaks during the first two months of 2007.
Many market watchers took the view that the falls were a necessary
correction in an upward market trend.
In early European trading, London's FTSE 100 index of leading shares
dropped 1.40 percent to 6,198.40 points, while the CAC 40 was showing a
fall of 1.04 percent to 5,530.54 points.
Frankfurt's DAX 30 index slid 1.42 percent to 6,722.39 points.
Europe's main indices had already plummeted between 2.0 and 3.0 percent
on Tuesday -- this ahead of declines of more than 3.0 percent for Wall
Street.
In Shanghai, share prices actually closed up 3.94 percent Wednesday, one
day after slumping 8.8 percent -- which was their biggest single day
loss in 10 years.
The rebound helped Tokyo to pare its losses, with the benchmark
Nikkei-225 index ending down 2.85 percent by the close.
Commenting on the falls in Europe, Mike Lenhoff, chief strategist at
Brewin Dolphin Securities in London, said: "I think giving up a few
percentage points isn't a big deal, in the context of things, when we've
had four great years of rising stock markets.
"People tend to focus on the billions (of dollars) that have been lost
yesterday (Tuesday) and possibly today but look at the trillions that
were actually made over the past four year. I think one has to put it
into perspective.
"I am not particularly worried about the end to the Chinese speculative
boom," Lenhoff added.
"I don't think there's an end to the Chinese economic boom. I think
that's going to continue and I don't think anybody is suggesting that it
isn't going to continue. What's going on in the (Chinese) economy is for
real and that will continue. What's going on in the stock market has
been a lot of punting."
The chief economist for Asia at Societe Generale, Glenn Maguire, said:
"What we are seeing is the echo of the fall in the Chinese market (on
Tuesday) and more importantly the fall that we saw in the US equity
market overnight.
"I don't think these moves significantly change the macroeconomic
outlook for China which remains relatively firm at this stage. I think
the markets should stabilise across the rest of the (Asian) region," he
added.
Market players were meanwhile nervously awaiting the start of trade on
Wall Street later in the day after the Dow Jones Industrial Average
ended down 3.29 percent on Tuesday -- the worst day on Wall Street since
2001.
Comments from former Federal Reserve chairman Alan Greenspan and rising
tension about Iran's nuclear programme added to undermine investor jitters.
Greenspan had warned on Monday that the US economy had been expanding
since 2001 and that there were signs that the current economic cycle was
coming to an end.
"I feel relatively confident that we're still going to see a decent year
out of the US and with that in mind it's just a matter of time before
the correction produces a buying opportunity," Lenhoff said.
"I don't feel this is the start of something really serious that is
going to take us all the way back to where we started four years ago."
On the foreign exchange market, the dollar rebounded but dealers
predicted the recovery could be short-lived amid fresh volatility on
stock markets and concerns about tensions in Iran and Afghanistan.
Oil prices were meanwhile down about 50 cents in London and New York.