MSM: Markets crash – How panic spread around the globe

Stockmarkets around the world slumped today as fears of a global recession deepened. After Wall Street fell to a five-year low last night, the rout started in Asia, where Singapore slid into recession, and quickly spread to Europe. In London, the FTSE 100 plunged more than 10% in early trading, and the Dow Jones dived nearly 700 points to 7882 shortly after Wall Street opened, a fall of 8%. Both markets later came off their lows, and the FTSE 100 closed almost 9% down and the Dow was seen off almost 2%.

Asia-Pacific

New Zealand
New Zealand’s benchmark NZX-50 index fell 4.7%, its biggest one-day fall since October 24 1997, at the height of the Asian financial crisis. The index closed down 139 points at 2805, its worst performance in six consecutive days of declines. Over the past six trading days the market has shed 427 points, or 14%.

Australia
Australian market watchers called it Black Friday. In Sydney, the benchmark S&P/ASX200 plummeted 8.34%, or 360 points, to close at 3960, its biggest ever one-day percentage loss. Together with the 8.2% plunge on the broader All Ordinaries index, today’s session wiped A$106bn (£41bn) from the value of stocks. Nearly every stock fell.

Japan
Tokyo’s Nikkei plunged 9.6% to close at its worst week in history. It lost nearly a quarter of its value this week. The index tumbled 881 points to 8276, its lowest level since May 2003. It was the biggest one-day percentage fall since the stockmarket crash of October 1987. At one stage the Nikkei was down more than 11%, and the slump prompted the Tokyo bourse and the Osaka Securities Exchange to briefly suspend some futures and options trading.

Yamato Life Insurance went bankrupt, the first major Japanese financial firm to collapse in the wake of the global credit crisis. Cash was king, with even Japanese government bonds being liquidated for funding. The Bank of Japan pumped ¥4.5 trillion (£26.97bn) into the money markets to ease liquidity. The yen, regarded as a safe-haven currency, jumped to a three-year high against the euro and a seven-year high against the pound.

South Korea
The Seoul Composite index dropped 4.1% to 1241 points.

China
The Shanghai Composite index fell 3.6% to 2000. China’s central bank said it would make forceful efforts to boost domestic demand, and stressed the country’s financial system was safe and stable. Analysts fear exports to the west will be hit hard.

Hong Kong
The Hong Kong stockmarket closed on a three-year low. The benchmark Hang Seng index was down 1146 points, or 7.2%, to 14,796 after falling by more than 9.5% at one point. It is the first time the index has fallen below the 15,000-level since January 2006.

Singapore
News that Singapore slid into recession for the first time since 2002 drove the Straits Times index lower by 162 points, or 7.7%, to 1940. The economy shrank 6.3% during the third quarter. Singapore’s central bank responded by easing monetary policy for the first time in five years.

Taiwan
Markets were closed for a national holiday.

Indonesia
Share trading was suspended for a third day.

India
India’s central bank slashed its cash reserve requirement to free up some $12bn in funds and ease a squeeze that drove overnight rates in money markets to a 19-month high and forced the government to cancel a bond auction. The rupee hit an all-time low and the main stock index plunged more than 9%.

India’s finance minister said on TV that there was no need to worry about Indian bank deposits and investors should not panic. He said liquidity in the banking sector would improve once parliament gave the nod to providing more.
Middle East

Israel
The Tel Aviv stock exchange was shut for the Yom Kippur holiday.

Iraq
The Baghdad stockmarket is booming, with the general index up by nearly 40% last month. Hotels and banks are among the hottest picks among the exchange’s 95 listed companies, as violence has fallen to a four-year low. Saad Jalil, an investor, told Reuters: “The world banking crisis won’t affect us, our market is sealed off from the outside. We don’t even have electronic trading.”
Africa

Egypt
The Egyptian stockmarket fell 4.6% to 1993 points, after plunging 16.4% to a two-year low on Tuesday.

Zimbabwe
While much of the rest of the world is anxious about plunging stock markets, bank collapses and a looming recession, Zimbabweans would settle for any of that just to be able to find cash and to have it worth something in the face of an official inflation rate of 231 million percent.

Independent economists say the real inflation rate is in the trillions, but such numbers have ceased to mean anything to most Zimbabweans, who are limited to withdrawing the equivalent of a few pence a day from their bank accounts because of a drastic shortage of cash notes, with the Zimbabwe dollar in freefall.

This week the government legalised the use of US dollars and rand in shops, formalising a part of the extensive foreign currency black market driven by the 3 million Zimbabweans who have left the country in search of work, mostly in South Africa. Everyone else is reduced to scraping by on near worthless salaries, bartering their furniture for food or growing their own to survive.
Europe

Central Europe
Russia, Romania and Ukraine suspended their stockmarkets today. The cost of insuring the sovereign debt of Ukraine, Kazakhstan and other eastern European countries soared, pricing in a mounting risk of default. Emerging sovereign debt spreads widened over US treasuries to their widest levels since mid-2004.

Russia
The Kremlin admitted it was considering a Brown-style plan to ease Russia’s dire banking problems. The Russian government will set up a special fund to buy “quality” assets from banks struggling with liquidity. Initially, Russia’s central bank would pump in $15bn.

Russia’s twin leaders, meanwhile, have wasted little time in blaming the US. President Dmitry Medvedev this week memorably accused the US administration of “economic egoism”. Vladimir Putin, Russia’s prime minister, went further. During a meeting with Russian communists, he said the US’s dominant role in economic matters was over. “Confidence in the United States as the leader of the free world and the free market… has been undermined – for good – I think,” Putin gleefully observed.

At the same time, Russia has been keen to understate its own economic difficulties. Although regulators suspended trading again today on Russia’s two main stockmarkets, TV news channels have been told not to use the words “collapse” or “crisis”. Apparently there isn’t one. There has been little mention on TV of the flight of foreign investors from Russia, or the fact that many Russian oligarchs are struggling to pay their dry cleaning bills.

Czech Republic
Stocks in Prague fell more than 13%.

Hungary
Shares in Budapest lost more than 12% and the Hungarian forint hit a two-year low.

Poland
The Polish deputy finance minister, Katarzyna Zajdel-Kurowska, said the fundamentals of Poland’s economy were strong, and blamed the overnight decline of the Polish zloty on the slump in Hungary. The zloty hit an eight-month low.

Iceland
There was no international trade of the Icelandic crown today after its banking sector, currency and economy crashed. Iceland says it has approached Russia for a loan to cover its banking liabilities, with analysts also speculating over a possible bail-out from the International Monetary Fund.

Austria
Share trading was briefly halted in Vienna this morning.

France
The CAC-40 index in Paris dropped 7.7% to 3176.

Germany
The Dax closed 7.1% down at 4541 points.

Sweden
Sweden’s stock exchange declared a “fast market” until further notice for cash trading and for the Nordic derivatives market. The bourse said a fast market is declared when a financial market is experiencing high volume and increased volatility. The move allows greater flexibility in some trading rules. Shares in Stockholm fell nearly 6% to 196 points this morning.

Italy
Nearly half of Milan stocks were suspended after excessive losses. Italian prime minister Silvio Berlusconi said the stockmarkets were in a grip of panic and fear, and expected consumption to fall due to fear. He said the government and the Bank of Italy had asked banks not to call in loans and to keep supporting industry. He also said European Union leaders may discuss the “hypothesis” of suspending markets temporarily while trying to resolve the global financial crisis.

Spain
The Madrid stock exchange lost 8.7% to 973 points at the close. Spanish prime minister Jose Luis Rodriguez Zapatero is pushing for an urgent meeting of the 15 eurozone leaders. He asked French president Nicolas Sarkozy, who currently holds the rotating EU presidency, to call the meeting “to define a strong, coordinated action among all the countries in the eurozone.”

Switzerland
The Swiss market dropped 4.75% to 5523 points.

UK
A wave of panic selling wiped more than £100bn off the value of Britain’s biggest companies.

Dealers in the City dumped shares when trading began, sending the FTSE 100 plummeting by more than 10% in early trading. It closed 8.85% lower at 3932.1 – a 381.7 point fall, wiping about £89.5bn off the value of Britain’s biggest companies. This is the worst daily fall since the crash of 1987, beating Monday’s 7.85% decline.

Banks and miners led the fallers, along with blue chip firms such as British Airways and BT, as the wider economy was pulled into the deepening financial crisis.
America/South America

United States
On Wall Street, the Dow Jones plummeted nearly 700 points in the first ten minutes of trading to 7882, a fall of 8%.

Brazil
Brazil’s main stock index plummeted more than 10% in early trading. The Ibovespa index fell 10.2% to 33,303 in just the first half-hour after markets opened. Trading was then halted for 30 minutes because of a “circuit breaker” rule that kicks in when the Ibovespa loses 10%. Global financial turmoil has wiped out two years of stock market gains in Latin America’s biggest economy. Brazil’s currency, the real, weakened to 2.3 against the US dollar.

Venezuela
President Hugo Chavez said his socialist revolution was not immune from the global financial crisis. State bonds on international markets have dropped to their lowest levels in five years and plunging oil prices are expected to squeeze next year’s budget. Consumer spending on cars and other big items has already started to shrivel.

The finance minister, Ali Rodriguez, made an unfamiliar call for austerity in government departments. “Spending on certain types of vehicles, mobile phones and parties will be eliminated,” he said.

Chavez said Venezuela’s state-heavy economy was better positioned to weather the financial storm, a “sinking of neoliberalism” which he blamed on the International Monetary Fund. He hoped the crisis would prompt other Latin American leaders to forge ahead with his cherished plan to create a “Bank of the South” to counter the Washington-dominated World Bank.

Cuba
Cuba’s isolation from global financial markets has largely protected it from capitalist contagion, allowing it to watch the turmoil with relative equanimity. “It was expected,” the former president, Fidel Castro, noted in his regular column in the communist party newspaper, Granma.

Other pro-government commentators blamed the crisis on the US and said “associates or tributaries of that empire” were now suffering the consequences. They said the time had come for Latin America to form the pan-regional leftist front which Cuba and Venezuela have espoused.

Cuba is facing its own crisis after a series of recent hurricanes devastated agriculture and infrastructure. President Raul Castro has warned of food shortages and months, if not years, of painful rebuilding. This week, the government started to lease land to private farmers, a cautious but potentially important initiative to loosen communist control and reform the island’s moribund agriculture.

Source: http://www.guardian.co.uk/business/2008/oct/10/marketturmoil-creditcrunch1