World stocks in major meltdown
Pastor Dale Morgan
World stocks in major meltdown*
From correspondents in London
August 02, 2007 06:03am
Article from: Agence France-Presse
EUROPEAN and Asian stock markets sank overnight, mirroring losses the
previous day in New York, on mounting fears that weakness in the US
housing sector could infect the world economy.
However, the major European stock markets wiped out some of their losses
of earlier in the day, amid a mixed opening on Wall Street.
In London the FTSE 100 index lost 1.72 per cent to close at 6250.60
points, while in Paris the CAC 40 lost 1.68 per cent to 5654.30 while in
Frankfurt the Dax lost 1.45 per cent to finish at 7473.93 points.
The DJ Euro Stoxx 50 index of top eurozone shares lost 1.82 per cent to
4237.05 points.
The euro stood at $US1.3679.
The yen meanwhile hit a four-month high against the dollar and oil
passed an all-time peak in New York as investors exited risky
investments and turned to safe-havens, dealers said.
Across the Atlantic US shares traded mixed in morning deals in a choppy
session following the prior day's selloff as investors worried about
contagion from credit problems linked to the ailing US housing sector.
Japanese stocks slumped by more than two per cent overnight, with the
Nikkei-225 index ending below 17,000 points for the first time in more
than four months.
In New York the Dow Jones Industrial Average was up 0.14 per cent to
13,230.52 while the Nasdaq composite fell 0.42 per cent to 2535.61.
The broad-market Standard & Poor's 500 index edged down 0.08 per cent to
1454.17.
Yesterday shares nose-dived amid news of spreading troubles in the
mortgage sector that led investors to shrug off positive economic and
earnings reports.
"It doesn't matter that the direct implications of these specific
problems are not large for the overall economy. They are bringing forth
fears of deeper problems in the flow of credit throughout the economy,"
said Dick Green, an analyst at Briefing.com.
"These concerns are legitimate but impossible to quantify," he said.
"The risks of a market downturn on any negative news related to
mortgages or credit standards remains significant."
Wall Street took a pounding yesterday, with its three main markets
closing down more than 1.0 per cent as news of spreading troubles in the
US mortgage sector prompted investors to bank profits.
Economists said there were growing jitters about the potential fallout
from problems in US subprime lending sector, where mortgages are
provided to people with questionable credit histories.
Analysts are concerned that growing mortgage defaults will hurt banks
and finance companies enough to curb the availability of credit on which
the economy feeds.
That, in turn, could affect private equity groups because their takeover
bids are often financed by large amounts of bank debt.
"The central issue that concerns the equity market is really the extent
to which this whole subprime fallout will affect a general credit
squeeze and reverse the expansion we have seen in the global economy,"
said Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London.
"There is this worry now that the ease with which lending has taken
place and the ease with which there has been access to borrowing to
finance the global economy is being unwound."
No market was immune to plunging equities overnight, as Hong Kong's key
Hang Seng Index closed down 3.15 per cent, China share prices shed 3.81
per cent and Indian's main equity market plunged 3.96 per cent.
Sydney's main stock market meanwhile dived 3.3 per cent after market
favourite Macquarie Bank said two high-yielding funds faced losses of up
to $300 million ($US258 million).
Shares in Macquarie Bank, known for its deal making and massive
executive pay-cheques, shed 10.7 per cent as a result, enough to prompt
Australian Treasurer Peter Costello to offer assurances that all was well.
US stocks had powered ahead on Tuesday as investors shrugged off unease
about a widening economic crisis that led to last week's bruising for
the equity market.
"We're likely to see the volatility persist for a while," Mr Lenhoff said.
"We'll have some good days, we'll have some bad days and eventually
we'll see a slightly clearer picture of what this subprime fallout
really means for the banks as well as for the credit markets.
"In turn that will hopefully help the credit markets to settle down and
move ahead," he said.
Losses were widespread in Europe. In Amsterdam the AEX index fell 1.79
per cent to 524.45 while Milan's SP/Mib dropped by 2.04 per cent to
39,401, and in Madrid the Ibex-35 lost 1.40 per cent to 14,595.7.
In Brussels the Bel-20 closed 1.66 per cent lower at 4311.80 points.