Global shares tumble on US fears

Dartzap · Post by **Dartzap** » 2008-01-21 02:03pm

Global shares tumble on US fears
Global stock indexes, including the UK FTSE 100, have fallen their most since the terrorist attacks of September 11 2001 amid fears of a recession.

The FTSE 100 index tumbled 5.5% to 5,578.2, wiping £84bn ($163bn) off the value of its listed shares.

Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.

Investors questioned whether a recent plan to boost the US economy would be enough to avert a full-blown recession.

Last week the US government announced a financial stimulus plan.

US markets are closed for a public holiday on Monday and reopen on Tuesday but other markets worldwide reacted negatively to the US plans.

Francis Lun of Fulbright Securities in Hong Kong said the falls stemmed from disappointment that the US stimulus was "too little, too late" adding that investors felt "it wouldn't help the economy recover".

'Panic mode'

The worry is that tax breaks and spending measures will not be enough to boost consumer spending in the US, because deeper economic problems remain.

In particular, the slowing housing market and problems in the sub-prime sector - which lends to those with limited or no credit histories - has contributed to a slowdown.

"We're falling back into the crisis of confidence in the financial sector," said Hugues Rialan, of Robeco France.

"The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realise there is nothing reassuring about it," he said.

Finance firms were among the main fallers, with Dutch ING Group, Germany's Allianz and Swiss Re all falling about 10%.

Many shoppers are struggling under higher mortgage repayment costs, prompting default rates to surge, especially among sub-prime borrowers.

This has prompted banks to tighten their lending policies after losing huge amounts of investments linked to the US housing and mortgage markets.

The state of the US economy is crucial for many of Europe's and Asia's biggest companies because it is one of their biggest export markets.

Any slowdown in demand is likely to hurt corporate profit growth and push share prices even lower, analysts have warned.

But some analysts took comfort from the prospect of falling US interest rates.

"If interest rates are cut to the extent we and others expect, the likelihood is that today's share prices will look like silly values in 12 months' time, if not before," said Mike Lenhoff at Brewin Dolphin Securities.

Global trend

Markets in China, India, South Korea, Singapore, Taiwan and the Philippines all fell.

In Mumbai, the main Sensex index fell 1,408 points, or 7.4%, adding to an 8% fall last week. Hong Kong's Hang Seng slumped 1,383.0 points, or 5.5%, to close at 23,818.9. Tokyo's main Nikkei 225 index fell 3.9%.

Australia's benchmark ASX 200 index closed down 2.9%, or 166.9, points at 5,580.4, which is its lowest level for a year.

It was also the 11th consecutive negative day for the index, the longest losing streak in more than 25 years.

"People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen at Action Economics.

So far this year, Japan's Nikkei has dropped 13%, the Hang Seng is down more than 14% and China's main Shanghai index has slipped almost 7%.

FTSE100 - WORST DAYS
20/10/87 down 12.2%
19/10/87 down 10.8%
26/10/87 down 6.2%
11/09/01 down 5.7%
22/10/87 down 5.7%

FTSE100 - BEST DAYS
21/10/87 up 7.9%
13/03/03 up 6.1%
10/04/92 up 5.6%
15/10/02 up 5.1%
25/07/02 up 5.0%

*winces* Ouch

J · Post by J » 2008-01-21 02:33pm

Also of interest are the following excerpts from a Bloomberg article. The disconnect with reality is quite hilarious.

link

Excerpt:

``It's the worst I've ever seen,'' said Johan Stein, who helps manage the equivalent of about $14 billion at Nordea Asset Management in Stockholm. ``The financial system is in terrible shape, and no one knows where this will end.''

Today's declines follow the worst week for U.S. stocks in five years after President George W. Bush's $150 billion plan to revive the economy and expectations of interest-rate cuts failed to allay recession concerns.

The risk of European companies defaulting soared to a record today on speculation credit-rating cuts at bond insurers including Ambac Financial Group Inc. may trigger forced asset sales. European Central Bank council member Nout Wellink said economic growth in the region may slow more than policy makers had expected.

Market Crisis

``This is a stock-market crisis,'' said Alberto Roldan, head of research at Inverseguros SVB in Madrid. ``Investors believe that neither a government package nor a huge rate cut is going to help evade a recession in the U.S.''

White House spokesman Tony Fratto said in Washington today the government doesn't comment on daily market moves.

``We're confident that the global economy will continue to grow, and that the U.S. economy will return to stronger growth,'' Fratto said in an e-mailed message.

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-21 03:34pm

It's scary when this suddenly manifests as you always feared and you even get the majority of clueless stock gurus taking note. And I'm expected to look at stuff to invest my pension fund in this week. Great.

MKSheppard · Post by **MKSheppard** » 2008-01-21 04:17pm

Weeeeeeeeeeeeeeeeee!

Everyone, quick, sell all your stocks and invest in survivalist gear!

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-21 05:20pm

Most would, except the likes of Aegon UK are denying people the right to withdraw their cash because they see rational moves to abandon a sinking ship as "panic", so they're keeping hold of the cash until things, ahem, improve.

aerius · Post by **aerius** » 2008-01-21 05:26pm

Chalk one up for the guys at TOD, though I don't think even they saw this big of a market crash happening this soon.

Genii Lodus · Post by **Genii Lodus** » 2008-01-21 05:27pm

But hey don't worry about that - oil was trading at a six week low so everything's OK!

Also once (if?) Bush's tax cuts goes through all will be well and an even bigger deficit certainly won't do anything unpleasant to the dollar would it?

Admiral Valdemar · Post by **Admiral Valdemar** » 2008-01-21 05:29pm

The US is actually begging for oil from the ME right now. You know there's something wrong when they're not "bringing democracy" to Saudi in order to get the black stuff they so need.

Illuminatus Primus · Post by **Illuminatus Primus** » 2008-01-21 05:39pm

MKSheppard wrote:Weeeeeeeeeeeeeeeeee!

Everyone, quick, sell all your stocks and invest in survivalist gear!

Or just buy in commodities and shares and essential services and industries.

Fingolfin_Noldor · Post by **Fingolfin_Noldor** » 2008-01-21 09:40pm

Illuminatus Primus wrote:
MKSheppard wrote:Weeeeeeeeeeeeeeeeee!

Everyone, quick, sell all your stocks and invest in survivalist gear!
Or just buy in commodities and shares and essential services and industries.

Isn't that assuming these services can get the capital they need to survive?

Vaporous · Post by **Vaporous** » 2008-01-21 09:55pm

Having re-read Only Yesterday, this sounds hilariously like the sunny optimism of the Hoover administration for the first few months of the Depression.

Braedley · Post by **Braedley** » 2008-01-22 12:04am

If it wasn't across the board, the 5% could be bearable, but there were no green arrows today during the brief financial report on the news today. I just hope that wall street will be able to pick up the pieces tomorrow and the world markets can recover some of the lost ground, although the only ones likely to do so tomorrow would be Toronto and Montreal.

Spin Echo · Post by **Spin Echo** » 2008-01-22 03:33am

Admiral Valdemar wrote:It's scary when this suddenly manifests as you always feared and you even get the majority of clueless stock gurus taking note. And I'm expected to look at stuff to invest my pension fund in this week. Great.

This is actually the time to invest, when stocks are low.

Terralthra · Post by **Terralthra** » 2008-01-22 04:32am

Spin Echo wrote:
Admiral Valdemar wrote:It's scary when this suddenly manifests as you always feared and you even get the majority of clueless stock gurus taking note. And I'm expected to look at stuff to invest my pension fund in this week. Great.
This is actually the time to invest, when stocks are low.

That assumes they're done going down.

Lusankya · Post by **Lusankya** » 2008-01-22 04:35am

Terralthra wrote:
Spin Echo wrote:
Admiral Valdemar wrote:It's scary when this suddenly manifests as you always feared and you even get the majority of clueless stock gurus taking note. And I'm expected to look at stuff to invest my pension fund in this week. Great.
This is actually the time to invest, when stocks are low.
That assumes they're done going down.

So long as they're undervalued, the worst that will happpen is you'll make slightly less profit.

Spin Echo · Post by **Spin Echo** » 2008-01-22 04:42am

It also depends on why they are going down. In Norway, they just appear to be going down because the rest of the world's stocks are sliding. People that take out loans to invest now have to sell, because banks stipulate that the stocks are only allowed to slide ~10% before they call back in the loan, thus driving down the Norwegian market as well. The actual Norwegian companies themselves appear to be doing just fine.

ray245 · Post by **ray245** » 2008-01-22 06:21am

Dammit...I was hoping that china and india will not be affected greatly to off-set the US falls in stock market...

Ace Pace · Post by **Ace Pace** » 2008-01-22 07:58am

ray245 wrote:Dammit...I was hoping that china and india will not be affected greatly to off-set the US falls in stock market...

What the fuck made you think that? The chinese and Indian economy are dependent on alot of exports and infusions of foreign cash to fund investments inside their economy.

acesand8s · Post by **acesand8s** » 2008-01-22 08:40am

Ace Pace wrote:What the fuck made you think that? The chinese and Indian economy are dependent on alot of exports and infusions of foreign cash to fund investments inside their economy.

There was a lot of emerging markets "decoupling" the past year, where they largely remained immune to the events that buffered the developed markets. The thesis is that the emerging middle class in those countries is creating a substantial enough domestic market to distance those countries from what happens in the developed world. Of course, that's only true to a point; eventually EM countries can't ignore what's going on in the rest of the world. It looks like we're there.

Post by **Broomstick** » 2008-01-22 08:54am

If the bottom is going to fall out I say let it happen and get it over with. Delaying the inevitable will not lessen the eventual pain, it will most likely only make it worse.

Vaporous wrote:Having re-read Only Yesterday, this sounds hilariously like the sunny optimism of the Hoover administration for the first few months of the Depression

Indeed, there are many parallels. I'm sort of hoping we can avoid a WWII look alike down the road. I don't think we can escape an economic "downturn" no matter how much the talking heads prattle about "we might in heading into a recession". Guess what, fucktards, it's already here. Get a grip, get over it, get ready to move on.

Dartzap · Post by **Dartzap** » 2008-01-22 09:03am

28 minutes to go until we see how bad Wall Street is feeling today. The Fed just snipped its interest as well. Today might be interesting, I suppose.

Spin Echo · Post by **Spin Echo** » 2008-01-22 09:20am

Broomstick wrote:If the bottom is going to fall out I say let it happen and get it over with. Delaying the inevitable will not lessen the eventual pain, it will most likely only make it worse.

This way the Republicans can't blame it on a Democratic president either.

SCRawl · Post by **SCRawl** » 2008-01-22 09:37am

Spin Echo wrote:
Broomstick wrote:If the bottom is going to fall out I say let it happen and get it over with. Delaying the inevitable will not lessen the eventual pain, it will most likely only make it worse.
This way the Republicans can't blame it on a Democratic president either.

There's always that pesky Democratic Congress....

Stravo · Post by **Stravo** » 2008-01-22 09:47am

Some of us got creamed in our retirement plans this past week in particular Thursday into Friday. I know one poor bastard that lost tens of thousands of dollars. I have constantly fought against any notion of private interests taking control of our retirement benefits like Social Security. On days like this you can see how badly it can fare for all Americans if private interests sink all of our money into the market.

Spin Echo · Post by **Spin Echo** » 2008-01-22 09:59am

SCRawl wrote:
Spin Echo wrote:
Broomstick wrote:If the bottom is going to fall out I say let it happen and get it over with. Delaying the inevitable will not lessen the eventual pain, it will most likely only make it worse.
This way the Republicans can't blame it on a Democratic president either.
There's always that pesky Democratic Congress....

You take what you can get.