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Download PDF Global stocks went into freefall yesterday, with double-digit losses in Frankfurt, London and Tokyo, on fears that the financial crisis was spiralling out of control, dealers said.
In the Far East, Tokyo suffered the biggest daily drop for two decades after shedding 11 percent at one stage, while in Europe, Frankfurt and London tipped more than 10.0 percent lower.
World finance chiefs were preparing an emergency meeting in Washington as a wave of panic selling swept across markets. Interest rate cuts and billions of dollars’ worth of cash injections by central banks failed to calm the mayhem.
“It’s very close to panic. We are drowning in a sea of red numbers,” said Barclays Wealth analyst Henk Potts.
“Investors are concerned about the exacerbation of the credit crunch and the gloomy forecasts for economic growth.
“The reality is that most investors have been spooked by the sheer pressure that the credit crunch is putting on the global economy.”
Tokyo nosedived, as the credit crisis claimed its first Japanese financial institution with the bankruptcy of Yamato Life Insurance, driving the Nikkei stock index down 9.6 percent by the close.
Indian share prices plunged yesterday to a two-year low and the rupee tumbled, despite central bank moves to boost liquidity and government attempts to ease fears of an economic slowdown.
Panic gripped the market in early trade as the benchmark 30-share Sensex intra-day slid 9.6 percent to 10,239.76 points and the rupee fell to a record low of 49.3 against the dollar, on fears of further overseas fund outflows.
India’s central bank immediately tried to douse concerns by pumping 400 billion rupees (8.2 billion dollars) into the system by lowering the cash reserve ratio for banks.
Hong Kong lost 7.2 percent as panic swirled about the state of the global banking industry.
In Europe, investors were also reacting to this week’s nationalisation of Icelandic banks Glitnir, Kaupthing and Landsbanki, victims of the crisis.
Shortly after the open, London and Frankfurt wiped out more than 10 percent of their value and Paris more than nine percent. All three later trimmed losses but only slightly.
Investors dumped shares across the globe in scenes reminiscent of the 1987 stock market crash.
“The last time I can remember this in the market was 1987,” said Justin Urquhart-Stewart, marketing director at Seven Investment Management.
London’s FTSE 100 index of leading shares nosedived 10.20 percent to as low as 3,873.99 points — the first time below 4,000 points since July 3, 2002 — before pulling back to show a loss of 7.81 percent at 1045 GMT.
“Today looks to be starting off as a complete bloodbath. The FTSE was obliterated on the open,” said Capital Spreads managing director Simon Denham in London.
“The markets are going to be absolutely mad throughout the session and hundred point moves in the indices and currencies — both up and down — are going to be ten a penny and likely to occur on a moment’s notice.”
He also warned investors: “Do not bet the house on a turn in the markets.”
Frankfurt’s DAX 30 shed more than 10.0 percent and in Paris the CAC 40 dived 9.68 percent at one stage. They later nursed losses of 9.06 percent and 7.99 percent respectively.
Back in Asia, the Tokyo market suffered the biggest loss in two decades, surpassing Wednesday’s plunge of 9.38 percent. The Nikkei has lost more than 24 percent over the past week.
The rout quickly spread to other markets. Sydney plunged 8.3 percent, Singapore lost 7.34 percent and Seoul slid 4.1 percent. Shanghai finished 3.57 percent lower.
Indian shares closed down 7.07 percent Friday, despite an injection of liquidity from the country’s Reserve Bank.
“It is ghastly,” said Macquarie Equities associate director Lucinda Chan in Sydney.
“Investors are buying up gold. It’s the only safe haven out there, otherwise it’s red everywhere.”
Japanese Prime Minister Taro Aso warned the slump “has reached a point where it affects the real economy.”
The Bank of Japan pumped a total of 4.5 trillion yen (45.5 billion dollars) into money markets, the most since the financial crisis started, while the stock exchange briefly halted some trading in futures and options. Singapore eased monetary policy for the first time in more than four years.
In New York, the Dow Jones index plunged 7.33 percent Thursday, closing below 9,000 points for the first time since 2003. Wall Street was due to reopen at 1330 GMT.
In Russia, regulators ordered the two main stock markets to remain closed after sharp falls in the United States and Asia, local media reported.
Markets were hoping for even more radical action from finance ministers and central bankers from the Group of Seven rich nations which meet in Washington later Friday, after emergency interest rates cuts by top world central banks this week failed to calm the turmoil.
The price of safe-haven gold rose while oil prices fell on worries about the prospect of weaker demand and as investors liquidate assets. Brent North Sea crude sank below the 80-dollar mark for the first time in about a year.
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