Global stock markets face fresh rout
Tuesday, 23 October 2007
LONDON, Oct 22 (AFP): World equity markets spiralled lower Monday as Asia and Europe took their cue from a pre-weekend Wall Street slump sparked by renewed US economic fears, credit concerns and record high oil prices.
Investors were rattled by a steep US decline Friday, when worries about the outlook for the world's largest economy grew amid poor earnings news on the 20th anniversary of the New York market crash.
Elsewhere Monday, the European single currency hit a record high US$1.4347. A strong euro makes eurozone exports more expensive for buyers using weaker currencies, and therefore weighs on European shares.
Frankfurt, London and Paris stock markets slid by more than 1.0 per cent in late morning deals Monday. Earlier in Asia, Tokyo tumbled 2.24 per cent and Hong Kong slumped 3.70 per cent at the close.
Global finance chiefs said over the weekend that the recent financial market turbulence, high oil prices and a US housing downturn were likely to "moderate" global growth from its recent robust levels.
"Investors have been spooked by three main things," said analyst Henk Potts at Barclays Wealth in London.
"Number one is concern that the problems we have been seeing in the credit market could last longer than originally hoped, and number two is the oil price reaching record levels last week.
"Number three is some disappointing numbers from Caterpillar, which was a sign that the problems we have been seeing are starting to affect the corporate picture."
Potts added that global stock markets were still in positive territory for the year-despite the fresh downturn.
Elsewhere in Europe Monday, Amsterdam equities fell 1.92 per cent, Madrid lost 1.48 per cent, Stockholm plunged 2.62 per cent and Zurich reversed by 1.13 per cent.
In Friday trade on Wall Street, the Dow Jones index lost a hefty 2.64 per cent after several major companies reported soft earnings and showed caution about the profit outlook.
Caterpillar, the US maker of heavy equipment which is regarded as highly sensitive to global economic conditions, offered weak guidance going forward.
Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC, noted that "uncertainty about the prospects for the US economy have increased after disappointing earnings amid the credit tightening concerns."
The market has been sensitive to the financial sector given recent US credit market problems. A weak earnings report from banking giant Wachovia, which also offered murky guidance going forward, added to market worries.
The dollar also suffered fresh losses Monday after Group of Seven finance chiefs refrained from voicing increased concern about currencies, which markets took as a green light to drive the greenback to another record low against the euro.
The yen shot higher, hitting Japanese exporter shares, as the latest stock market rout prompted investors to unwind risky bets funded by selling the Japanese unit.
Japanese exporters have benefited greatly from the weakness of the yen, so investors react nervously to any sign of the currency appreciating.
Wall Street's steep decline sent "shockwaves" through the South Korean market, said Lim Dong-Min, a stock analyst at Dongbu Securities.
"When the US sneezes, the rest of the world catches a bad cold, and that's more evident in emerging markets as they had enjoyed solid gains this year," he said.
In Asia Monday, Seoul lost 3.40 per cent, Taipei dived 2.61 per cent, Manila gave up 3.98 per cent and Jakarta slumped 3.80 per cent.
Singapore ended 2.80 per cent lower, Shanghai slipped 2.59 per cent and Sydney finished trade with a loss of 1.90 per cent.
Investors were rattled by a steep US decline Friday, when worries about the outlook for the world's largest economy grew amid poor earnings news on the 20th anniversary of the New York market crash.
Elsewhere Monday, the European single currency hit a record high US$1.4347. A strong euro makes eurozone exports more expensive for buyers using weaker currencies, and therefore weighs on European shares.
Frankfurt, London and Paris stock markets slid by more than 1.0 per cent in late morning deals Monday. Earlier in Asia, Tokyo tumbled 2.24 per cent and Hong Kong slumped 3.70 per cent at the close.
Global finance chiefs said over the weekend that the recent financial market turbulence, high oil prices and a US housing downturn were likely to "moderate" global growth from its recent robust levels.
"Investors have been spooked by three main things," said analyst Henk Potts at Barclays Wealth in London.
"Number one is concern that the problems we have been seeing in the credit market could last longer than originally hoped, and number two is the oil price reaching record levels last week.
"Number three is some disappointing numbers from Caterpillar, which was a sign that the problems we have been seeing are starting to affect the corporate picture."
Potts added that global stock markets were still in positive territory for the year-despite the fresh downturn.
Elsewhere in Europe Monday, Amsterdam equities fell 1.92 per cent, Madrid lost 1.48 per cent, Stockholm plunged 2.62 per cent and Zurich reversed by 1.13 per cent.
In Friday trade on Wall Street, the Dow Jones index lost a hefty 2.64 per cent after several major companies reported soft earnings and showed caution about the profit outlook.
Caterpillar, the US maker of heavy equipment which is regarded as highly sensitive to global economic conditions, offered weak guidance going forward.
Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC, noted that "uncertainty about the prospects for the US economy have increased after disappointing earnings amid the credit tightening concerns."
The market has been sensitive to the financial sector given recent US credit market problems. A weak earnings report from banking giant Wachovia, which also offered murky guidance going forward, added to market worries.
The dollar also suffered fresh losses Monday after Group of Seven finance chiefs refrained from voicing increased concern about currencies, which markets took as a green light to drive the greenback to another record low against the euro.
The yen shot higher, hitting Japanese exporter shares, as the latest stock market rout prompted investors to unwind risky bets funded by selling the Japanese unit.
Japanese exporters have benefited greatly from the weakness of the yen, so investors react nervously to any sign of the currency appreciating.
Wall Street's steep decline sent "shockwaves" through the South Korean market, said Lim Dong-Min, a stock analyst at Dongbu Securities.
"When the US sneezes, the rest of the world catches a bad cold, and that's more evident in emerging markets as they had enjoyed solid gains this year," he said.
In Asia Monday, Seoul lost 3.40 per cent, Taipei dived 2.61 per cent, Manila gave up 3.98 per cent and Jakarta slumped 3.80 per cent.
Singapore ended 2.80 per cent lower, Shanghai slipped 2.59 per cent and Sydney finished trade with a loss of 1.90 per cent.