Wall Street breaks slump
Sunday, 23 November 2008
NEW YORK, Nov 22 (AFP): Wall Street staged a stunning late rebound Friday in another tumultuous day for global markets that saw heavy losses in Europe amid growing concerns over a grim global economic outlook.
US markets had been wobbling after two days of brutal selling that erased some 10 per cent from the main indexes, but got a late boost from reports that president-elect Barack Obama had chosen New York Fed chief Timothy Geithner to be his Treasury secretary.
The news energized buyers in the final hour after markets had been bruised by the heavy selling that pushed the broad US market to its lowest levels since 1997.
The Dow Jones Industrial Average vaulted 6.54 per cent to close at 8,046.42, ending the week on a positive note.
The Nasdaq composite climbed 5.18 per cent to 1,384.35 and the Standard & Poor's 500 index jumped 6.32 per cent to 800.03.
The turnaround came as NBC News said Obama will personally unveil Geithner as the incoming Treasury boss at a news conference Monday, along with other members of his economic team.
Augustine Faucher at Economy.com called Geithner "an excellent choice for the post, given his background and work tackling the financial crisis."
Faucher added, "With the continued turmoil in financial markets, Obama is moving quickly to put his economic team in place, so it can start to work immediately after his inauguration on January 20."
Geithner (47) has been on the front lines of the US central bank's battle to shore up the markets by overseeing its intervention operations from his berth at the New York Fed.
In Europe, the London FTSE 100 index of leading shares fell 2.43 per cent to 3,780.96 -- its lowest closing level since April 3, 2003, capping an overall fall of 10.68 per cent for the week.
In Paris, the CAC 40 plunged 3.33 per cent to 2,881.26 and in Frankfurt the DAX shed 2.20 per cent to 4,127.41.
"Although this morning saw a slight rally for the UK market, the afternoon has seen these gains eroded with the market nose diving," said David Jones, a strategist at IG Index in London.
"Sentiment this week has turned even gloomier than we have been used to of late."
In a sign of the volatility, markets moved briefly on a report in the Wall Street Journal that Citigroup was considering selling all or parts of the US banking giant in a massive restructuring effort.
Citigroup later denied the report and its shares continued to slide amid growing concerns about the future of what was only recently the largest US bank. Citi lost another 19 per cent Friday to 3.77 dollars.
"Whether through panic, speculation, fear or the forced unwinding of positions, we are witnessing mass selling on every level," said GFT derivatives head Martin Slaney.
"The risk of global economic recession is deepening by the day. The prospect of 'The Great Depression Two' is a genuine one and is plain scaring investors."
Business activity in the 15 nations sharing the euro slumped in November at the fastest pace on record as a severe downturn deepened, according to a widely watched survey Friday.
The eurozone's purchasing managers' index (PMI), compiled by data and research group Markit, dropped to 39.7 points in November from 43.6 in October, the biggest drop on record.
Investors were also unnerved by news US lawmakers put off a vote on a bailout for crisis-hit US automakers until at least December and ordered industry chiefs to come up with a new restructuring plan.
Investors are worried about the hazy outlook for further steps to tackle the worst financial crisis in decades because president-elect Obama will not take office until late January.
"We are at a very difficult time for markets when the US administration is shifting," said Shinichi Ichikawa, chief equity strategist in Tokyo for Credit Suisse.
"We cannot expect at this time that either the outgoing president or the president-elect will come up with a policy that shows his strong intention to improve the economy fundamentally." "No reasonable person is calling a bottom in stocks or the economy right now," said Sherry Cooper, chief economist at BMO Capital Markets.
Earlier Friday, Asian markets were buoyed by bargain-hunting and hopes of a rally on Wall Street. Tokyo closed up 2.70 per cent, Hong Kong rallied 2.90 per cent, Seoul surged 5.80 per cent and Hong Kong Sydney gained 1.90 per cent.
US markets had been wobbling after two days of brutal selling that erased some 10 per cent from the main indexes, but got a late boost from reports that president-elect Barack Obama had chosen New York Fed chief Timothy Geithner to be his Treasury secretary.
The news energized buyers in the final hour after markets had been bruised by the heavy selling that pushed the broad US market to its lowest levels since 1997.
The Dow Jones Industrial Average vaulted 6.54 per cent to close at 8,046.42, ending the week on a positive note.
The Nasdaq composite climbed 5.18 per cent to 1,384.35 and the Standard & Poor's 500 index jumped 6.32 per cent to 800.03.
The turnaround came as NBC News said Obama will personally unveil Geithner as the incoming Treasury boss at a news conference Monday, along with other members of his economic team.
Augustine Faucher at Economy.com called Geithner "an excellent choice for the post, given his background and work tackling the financial crisis."
Faucher added, "With the continued turmoil in financial markets, Obama is moving quickly to put his economic team in place, so it can start to work immediately after his inauguration on January 20."
Geithner (47) has been on the front lines of the US central bank's battle to shore up the markets by overseeing its intervention operations from his berth at the New York Fed.
In Europe, the London FTSE 100 index of leading shares fell 2.43 per cent to 3,780.96 -- its lowest closing level since April 3, 2003, capping an overall fall of 10.68 per cent for the week.
In Paris, the CAC 40 plunged 3.33 per cent to 2,881.26 and in Frankfurt the DAX shed 2.20 per cent to 4,127.41.
"Although this morning saw a slight rally for the UK market, the afternoon has seen these gains eroded with the market nose diving," said David Jones, a strategist at IG Index in London.
"Sentiment this week has turned even gloomier than we have been used to of late."
In a sign of the volatility, markets moved briefly on a report in the Wall Street Journal that Citigroup was considering selling all or parts of the US banking giant in a massive restructuring effort.
Citigroup later denied the report and its shares continued to slide amid growing concerns about the future of what was only recently the largest US bank. Citi lost another 19 per cent Friday to 3.77 dollars.
"Whether through panic, speculation, fear or the forced unwinding of positions, we are witnessing mass selling on every level," said GFT derivatives head Martin Slaney.
"The risk of global economic recession is deepening by the day. The prospect of 'The Great Depression Two' is a genuine one and is plain scaring investors."
Business activity in the 15 nations sharing the euro slumped in November at the fastest pace on record as a severe downturn deepened, according to a widely watched survey Friday.
The eurozone's purchasing managers' index (PMI), compiled by data and research group Markit, dropped to 39.7 points in November from 43.6 in October, the biggest drop on record.
Investors were also unnerved by news US lawmakers put off a vote on a bailout for crisis-hit US automakers until at least December and ordered industry chiefs to come up with a new restructuring plan.
Investors are worried about the hazy outlook for further steps to tackle the worst financial crisis in decades because president-elect Obama will not take office until late January.
"We are at a very difficult time for markets when the US administration is shifting," said Shinichi Ichikawa, chief equity strategist in Tokyo for Credit Suisse.
"We cannot expect at this time that either the outgoing president or the president-elect will come up with a policy that shows his strong intention to improve the economy fundamentally." "No reasonable person is calling a bottom in stocks or the economy right now," said Sherry Cooper, chief economist at BMO Capital Markets.
Earlier Friday, Asian markets were buoyed by bargain-hunting and hopes of a rally on Wall Street. Tokyo closed up 2.70 per cent, Hong Kong rallied 2.90 per cent, Seoul surged 5.80 per cent and Hong Kong Sydney gained 1.90 per cent.