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World stock markets plunge on crisis fears
2008-10-06
LONDON - Stock markets slumped worldwide Monday, some marking record one-day drops, on fears the global financial crisis will worsen and hit the wider economy despite bank bailouts in the U.S. and Europe. Stocks began their nosedive in Asia, where investors found little comfort from Washington's approval on Friday of a $700 billion bank rescue plan. Doubts over the degree to which the plan could help thaw frozen lending markets and recapitalize banks caused financial stocks to plummet and drag down major indexes. European shares then shot lower on the open, with some suffering the heaviest losses in their history. More bank bailouts over the weekend underscored the fact that Europe has now moved into the eye of the credit crisis storm with European policymakers so far unwilling to come up with a common rescue plan. Later in the day, Latin America stock markets joined the global bloodletting, while oil prices also fell below $90 a barrel on expectations that world economic growth will suffer and hurt demand for crude. In the U.S., the Dow Jones industrial average fell below the 10,000 mark for the first time since 2004, closing off 369.88 points, or 3.6 percent, at 9955.50. Britain's benchmark stock index FTSE 100 lost 391.06 points to close at 4589.19 -- a 7.85 percent fall. The declines were led by the banking industry, with the mining and oil industries also suffering drops. HBOS PLC's share price slumped 17.21 percent, while the Royal Bank of Scotland Group PLC fell 20.46 percent. Germany's DAX index dropped 7.07 percent to close at 5,387.01, while France's CAC-40 index suffered its worst day since its creation in 1988, dropping 9.04 percent to 3,711.98. The Irish Stock Exchange was among the worst hit in Europe, plummeting 9.6 percent to close at 3,565. In Russia, where trading was suspended because of excess volatility, the MICEX also suffered its largest one-day drop ever, falling 18.66 percent at 752.00. A separate Russian stock index, the RTS, fell 19.10 percent. Iceland's exchange opened but was then shut down, as the government rushed to draft a plan to deal with the financial turmoil's impact on its over-leveraged banking sector. Government officials later said it would guarantee all domestic savings deposits, but failed to provide a more comprehensive plan for its banking sector. As governments came under pressure to calm the public's fear over deposit savings, Germany, Austria and Denmark joined Greece, France and Ireland in making commitment of varying clarity to guarantee all private deposits, while Sweden doubled the amount it would insure. At the same time, the governments of Germany and Belgium made last-ditch efforts to bail out ailing banks. Germany agreed a 50 billion euro ($68 billion) package to bail out Hypo Real Estate, the country's second-biggest commercial property lender, after a rescue plan by private lenders fell apart. In Belgium, the government managed to get French bank BNP Paribas SA to buy a 75 percent stake in troubled lender Fortis NV. But as the rate of bank rescue deals intensified, Europe showed few signs of being able to work together on a common solution, all of which unnerved markets. An economic summit of European leaders over the weekend failed to produce any concrete plan, and the continent's governments were instead separately taking steps to guarantee the safety of their respective financial systems. A two-day meeting of finance ministers in Luxembourg started today, but officials in Germany and elsewhere have spoken out against the idea of a U.S.-style bailout fund for all of Europe. European Central Bank President Jean-Claude Trichet said Monday in Luxembourg he thinks jittery financial markets are overestimating risks. Across Asia, all markets closed in the red. Tokyo's Nikkei 225 index fell to its lowest level in 4 1/2 years, sinking 4.25 percent to 10,473.09. Hong Kong's Hang Seng index slid 5 percent to 16,803.76. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also dropped sharply. Indonesia's key index plummeted 10 percent, its biggest one-day drop ever, while the benchmark Shanghai Composite Index sank 3.7 percent to 2,293.78. Banks and other financial shares saw heavy declines. Shares of Ping An Insurance Co. rose even after it said Monday it will record a $2.3 billion loss on its stake in European bank Fortis in the biggest blow yet to a Chinese institution from the global credit crisis. Ping An's shares rose 0.4 percent. "This credit crunch looks like it's not going away any time soon," said Alex Tang, head of research at brokerage Core Pacific-Yamaichi in Hong Kong. "Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the U.S. economy." Figures released Friday showed that 159,000 jobs in the U.S. were lost last month, the fastest pace in more than five years. Such concerns overshadowed any investor optimism over the U.S. House of Representatives' approval Friday of a massive bailout plan that will allow the U.S. government to buy distressed mortgages and securities backed by mortgages from banks and other financial institutions. Investors questioned how long it would take for the package to unfreeze credit markets, restore bank lending and generally shore up the U.S. economy. "The market had already figured in the package's passage," said Yukio Takahashi at Shinko Securities Co. in Tokyo. "There are strong doubts about its implementation." Latin American stocks also plunged also Monday, led by a stunning 15 percent intraday drop in Brazilian shares, on concern a major economic slowdown would devastate the region's commodities-based economies. Trading was halted twice on Sao Paulo's Ibovespa index as stocks sank 15 percent -- reaching their lowest level in two years before rebounding. Brazil's currency, the real, slumped nearly 7 percent in its biggest one-day percentage loss against the U.S. dollar since 2002 and closed at a level not seen since September 25, 2006. The Ibovespa later recovered, but still ended the day down 5.4 percent at 42,101, its lowest closing since Nov. 28, 2006. Argentina's Merval fell 5.9 percent to close at 1,423, while Mexico's IPC index slid 5.4 percent to 21,749. Chile's IPSA dipped 6 percent to 2,450, and Colombia's IGBC fell 4.9 percent to 8,761. Canada's main stock exchange, meanwhile, dropped 572.92 points, or 5 percent, after earlier plunging 10 percent amid widespread economic fears. _____ Associated Press Writers Alex Kennedy in Singapore and Yuri Kageyama in Tokyo, Emily Vencat in London and Alan Clendenning in Sao Paulo, Brazil contributed to this story
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