Shares plunge on fears of recession in America
Source: Agencies |
August 19, 2011, Friday
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Print Edition
Print Edition
STOCK markets around the world plunged yesterday amid rising signs of recession in the United States combined with renewed worries over the financial health of Europe's banks.
After a few days of relative calm in the markets, investors are back in an unforgiving mood as the negative newsflow culminated in a woeful manufacturing survey from the Federal Reserve Bank of Philadelphia.
Its main indicator of factory activity slid to a near two and a half year low of minus 30.7 in August from a positive 3.2 reading in July. The slide suggests a recession is well and truly in prospect in the Philadelphia region - anything below zero indicates a contraction.
"This was obviously a terrible report, and, if sustained, readings like these would be consistent with recession," said Joshua Shapiro, chief US economist at MFR Inc.
The survey came in the wake of figures showing more Americans had applied for unemployment benefits last week than they did in the previous week.
Earlier, investor sentiment had been knocked by news from Japan that exports in July fell 3.3 percent from a year earlier to 5.78 trillion yen (US$75.6 billion) as a result of the strong yen and the ongoing impact of the March 11 earthquake and tsunami.
British retail sales also disappointed in July and a rebound in August looks unlikely, analysts said, following a wave of riots around England.
In Europe, Britain's FTSE 100 closed down 4.5 percent at 5,092.23, while Germany's DAX fell 5.8 percent to 5,602.80. France's CAC-40 ended 5.5 percent lower at 3,076.04.
Banks take beating
In the US, the Dow Jones industrial average slid 3.9 percent to 10,937 while the broader Standard & Poor's 500 index fell 3.8 percent to 1,148.
The banks took a particular beating from fears over the global economic recovery combined with the prospect of a new tax on financial transactions and renewed concerns over Greece's bailout. French bank Societe Generale and British bank Barclays led the way down, with double digit percentage losses.
"Banking stocks have been decimated across Europe, with indiscriminate selling even in banks that maintain their exposure to the crisis is slim," said Will Hedden, a trader at IG Index.
The euro was in retreat, trading 0.8 percent lower at US$1.4312, and oil prices also tanked alongside equities.
Benchmark crude for September delivery was down US$4.25 to US$83.33 a barrel. Brent crude, which is used to price many international oil varieties, dropped $3.06 to US$107.54 per barrel on the ICE Futures exchange in London.
Investors are keeping a close watch on developments with regard to Europe's debt crisis, after a little-noticed deal requiring Greece to put up collateral in order to receive a bailout loan from Finland triggered similar requests from other eurozone countries.
In Asia, Japan's Nikkei 225 closed down 1.3 percent to 8,943.76 after the export figures, while South Korea's Kospi lost 1.7 percent to 1,853.08. Hong Kong's Hang Seng shed 1.3 percent at 20,016.27. The Shanghai Composite Index lost 1.6 percent to 2,559.47 and the Shenzhen Composite Index lost 1.8 percent to 1,142.91.
After a few days of relative calm in the markets, investors are back in an unforgiving mood as the negative newsflow culminated in a woeful manufacturing survey from the Federal Reserve Bank of Philadelphia.
Its main indicator of factory activity slid to a near two and a half year low of minus 30.7 in August from a positive 3.2 reading in July. The slide suggests a recession is well and truly in prospect in the Philadelphia region - anything below zero indicates a contraction.
"This was obviously a terrible report, and, if sustained, readings like these would be consistent with recession," said Joshua Shapiro, chief US economist at MFR Inc.
The survey came in the wake of figures showing more Americans had applied for unemployment benefits last week than they did in the previous week.
Earlier, investor sentiment had been knocked by news from Japan that exports in July fell 3.3 percent from a year earlier to 5.78 trillion yen (US$75.6 billion) as a result of the strong yen and the ongoing impact of the March 11 earthquake and tsunami.
British retail sales also disappointed in July and a rebound in August looks unlikely, analysts said, following a wave of riots around England.
In Europe, Britain's FTSE 100 closed down 4.5 percent at 5,092.23, while Germany's DAX fell 5.8 percent to 5,602.80. France's CAC-40 ended 5.5 percent lower at 3,076.04.
Banks take beating
In the US, the Dow Jones industrial average slid 3.9 percent to 10,937 while the broader Standard & Poor's 500 index fell 3.8 percent to 1,148.
The banks took a particular beating from fears over the global economic recovery combined with the prospect of a new tax on financial transactions and renewed concerns over Greece's bailout. French bank Societe Generale and British bank Barclays led the way down, with double digit percentage losses.
"Banking stocks have been decimated across Europe, with indiscriminate selling even in banks that maintain their exposure to the crisis is slim," said Will Hedden, a trader at IG Index.
The euro was in retreat, trading 0.8 percent lower at US$1.4312, and oil prices also tanked alongside equities.
Benchmark crude for September delivery was down US$4.25 to US$83.33 a barrel. Brent crude, which is used to price many international oil varieties, dropped $3.06 to US$107.54 per barrel on the ICE Futures exchange in London.
Investors are keeping a close watch on developments with regard to Europe's debt crisis, after a little-noticed deal requiring Greece to put up collateral in order to receive a bailout loan from Finland triggered similar requests from other eurozone countries.
In Asia, Japan's Nikkei 225 closed down 1.3 percent to 8,943.76 after the export figures, while South Korea's Kospi lost 1.7 percent to 1,853.08. Hong Kong's Hang Seng shed 1.3 percent at 20,016.27. The Shanghai Composite Index lost 1.6 percent to 2,559.47 and the Shenzhen Composite Index lost 1.8 percent to 1,142.91.
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