Stock Markets sell-off as recovery fears trigger flight to safety
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Pastor Dale Morgan
Aug 25, 2010, 2:10:38 AM8/25/10
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Perilous Times
Stock Markets sell-off as recovery fears trigger flight to safety
Stock and commodity markets across the world suffered a torrid sell-off on Tuesday as investors fled for safe havens amid new fears over the durability of the global recovery.
By Philip Aldrick, Economics Editor
Published: 10:57PM BST 24 Aug 2010
Markets fall as dip fears trigger flight to safety
Stock markets in Japan, Europe, and the US fell as investors took fright. Photo: AP
Economists warned of a "long hard slog" and the "Japanisation" of western nations, with slow growth and low interest rates for years to come, following dispiriting housing data from the US.
Julian Jessop, chief international economist at Capital Economics, said: "Global growth is undoubtedly faltering and the outlooks for the major advanced economies are pretty poor."
In the UK, yields on long-term Government debt fell to 2.876pc – the lowest level on record – as investors sought out their relative safety after a central bank policymaker warned there remains a "significant" risk of a double dip recession and sluggish mortgage numbers suggested household finances remain under severe pressure.
Commodity prices and shares fell in all major markets as traders bet that corporate profitability and demand for goods would wane in the coming months.
The FTSE 100 closed 78.89 points lower at 5,155.95. Japan's Nikkei fell 1.3pc, crashing below the 9,000 barrier for the first time in 15 months. The Dow ended the day 1.3pc lower at 10,040.45. Oil, copper and coffee led the raw material index down 2pc.
Weak mortgage approval data from the British Bankers' Association, as the number of new mortgages fell from 34,575 in June to 33,698 in July, and Bank of England Monetary Policy Committee member Martin Weale's comment that a double dip remained a "real risk", spooked UK investors – sending the pound down more than a cent against the dollar in early trading.
Those concerns were exacerbated later by US housing data as existing home sales fell 27.2pc, to their lowest level in 15 years, as the stock of property for sale rose to its highest in a decade – at 12.5 months. Phil Jordan, sales trader at Monument Securities, described the numbers as "horrendous".
Tommy Leung, head of European credit strategy at UBS, said: "Weaker than expected US economic data over the past few weeks have been weighing on the market for some time. Investors are becoming increasingly concerned that the US and western Europe will move to a Japanese scenario with low growth, low rates and an aging population."
Sterling recovered some ground against the dollar as the US currency collapsed following the dismal housing data, but ended down half a cent at $1.5453. The dollar hit a 15-year low against the yen – a bulwark against recessions as the Japanese traditionally repatriate funds, underpinning the currency.
Mr Jessop warned that the US is now at "risk of deflation and a lurch towards protectionism, starting with restrictions on imports from China".
Mike Dicks, managing director of economics and strategy at Barclays Wealth, claimed that austerity measures such as Britain's planned spending cuts were adding to fears. The US housing data, more than twice as bad as expected, was the first since the government's homebuyer tax credit was withdrawn.
"There are echoes in that when you think what the impact of fiscal tightening might be in countries introducing such measures," he said. "Double dip is now on everyone's mind. 'Japanisation', or a long hard slog, as I prefer to call it, is the worry."
Stock Markets sell-off as recovery fears trigger flight to safety
Stock and commodity markets across the world suffered a torrid sell-off on Tuesday as investors fled for safe havens amid new fears over the durability of the global recovery.
By Philip Aldrick, Economics Editor
Published: 10:57PM BST 24 Aug 2010
Markets fall as dip fears trigger flight to safety
Stock markets in Japan, Europe, and the US fell as investors took fright. Photo: AP
Economists warned of a "long hard slog" and the "Japanisation" of western nations, with slow growth and low interest rates for years to come, following dispiriting housing data from the US.
Julian Jessop, chief international economist at Capital Economics, said: "Global growth is undoubtedly faltering and the outlooks for the major advanced economies are pretty poor."
In the UK, yields on long-term Government debt fell to 2.876pc – the lowest level on record – as investors sought out their relative safety after a central bank policymaker warned there remains a "significant" risk of a double dip recession and sluggish mortgage numbers suggested household finances remain under severe pressure.
Commodity prices and shares fell in all major markets as traders bet that corporate profitability and demand for goods would wane in the coming months.
The FTSE 100 closed 78.89 points lower at 5,155.95. Japan's Nikkei fell 1.3pc, crashing below the 9,000 barrier for the first time in 15 months. The Dow ended the day 1.3pc lower at 10,040.45. Oil, copper and coffee led the raw material index down 2pc.
Weak mortgage approval data from the British Bankers' Association, as the number of new mortgages fell from 34,575 in June to 33,698 in July, and Bank of England Monetary Policy Committee member Martin Weale's comment that a double dip remained a "real risk", spooked UK investors – sending the pound down more than a cent against the dollar in early trading.
Those concerns were exacerbated later by US housing data as existing home sales fell 27.2pc, to their lowest level in 15 years, as the stock of property for sale rose to its highest in a decade – at 12.5 months. Phil Jordan, sales trader at Monument Securities, described the numbers as "horrendous".
Tommy Leung, head of European credit strategy at UBS, said: "Weaker than expected US economic data over the past few weeks have been weighing on the market for some time. Investors are becoming increasingly concerned that the US and western Europe will move to a Japanese scenario with low growth, low rates and an aging population."
Sterling recovered some ground against the dollar as the US currency collapsed following the dismal housing data, but ended down half a cent at $1.5453. The dollar hit a 15-year low against the yen – a bulwark against recessions as the Japanese traditionally repatriate funds, underpinning the currency.
Mr Jessop warned that the US is now at "risk of deflation and a lurch towards protectionism, starting with restrictions on imports from China".
Mike Dicks, managing director of economics and strategy at Barclays Wealth, claimed that austerity measures such as Britain's planned spending cuts were adding to fears. The US housing data, more than twice as bad as expected, was the first since the government's homebuyer tax credit was withdrawn.
"There are echoes in that when you think what the impact of fiscal tightening might be in countries introducing such measures," he said. "Double dip is now on everyone's mind. 'Japanisation', or a long hard slog, as I prefer to call it, is the worry."
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