Panic grips world stock markets
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LONDON (AFP) - World stock markets plummeted on Monday, striking four-year lows, as panic-stricken investors doubted whether a Wall Street bailout package would stem the global financial crisis.
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London, Frankfurt and Paris all tumbled more than six percent before pulling back slightly while a 15-percent dive in Moscow forced yet another halt to Russian trading.
"There is all-out panic," said ING senior strategist Adrian van Tiggelen.
"Everyone had hoped that after the acceptance of the package in the US and the bailouts in Europe, things would cam down but in effect, there are still strong fears of the domino effect."
Iceland's stock market suspended trading in all financial shares including three major banks amid reports of a government rescue of the stricken banking sector.
Investors dumped shares after US stock markets had fallen sharply on Friday despite US congressional approval of a 700-billion-dollar bank bailout. Wall Street was due to reopen at 1330 GMT.
In afternoon trade, London was down 5.23 percent, Paris showed a loss of 5.63 percent and Frankfurt shed 5.43 percent.
"We have a seriously weak and fear driven market at our hands," said Tom Hougaard, chief market strategist at City Index. "It is anyone's guess where we will end the day."
On Monday, Tokyo ended down 4.25 percent as Hong Kong shed 5.0 percent, Seoul tumbled 4.3 percent and Sydney lost 3.3 percent. Shanghai dived 5.23 percent and Mumbai plunged 5.78 percent to close at two-year lows.
European stocks plummeted after Germany's fourth biggest bank, Hypo Real Estate, had to be rescued afresh over the weekend -- news that pushed the euro to a 13-month low against the dollar on Monday.
Oil meanwhile tumbled to eight-month lows below 90 dollars a barrel in London and New York as worsening financial turmoil triggered fears about slowing demand for energy.
"The market is not convinced that the US bailout package can protect the economy from the financial crisis," said Toyo Securities strategist Ryuta Otsuka.
Riyadh, the largest stock market in the Arab world, shed almost 10 percent halfway through trading on Monday and shares in other energy-rich Arab states in the Gulf also slumped.
"The Fed's bailout plan may have been passed on Friday but so far there's been no real reaction in credit markets and because of this, the natural assumption is going to be that the measures won't work, even if such a call is rather premature," said CMC Markets dealer Matt Buckland.
Underscoring the worsening conditions in the United States, the world's largest economy, 159,000 US jobs were lost in September, data showed Friday.
"The approval of the financial rescue plan failed to bolster market confidence. Pessimism towards the global economy is running deeper," said Young Wang, an analyst at Yuanta Securities Investment Consulting in Taipei, where stocks ended down 4.1 percent, also at a four-year low.
As the US-centred financial crisis takes a stronger grip in Europe, the German government agreed an emergency rescue package of 50 billion euros (68 billion dollars), for Hypo Real Estate, late Sunday.
It also announced an unlimited guarantee for personal savings deposits.
France's BNP Paribas meanwhile announced Sunday that it was taking control of the operations of ailing financial group Fortis in Belgium and Luxembourg.
The leaders of France, Germany, Italy and Britain vowed over the weekend to protect fragile banks but did not discuss a joint, European financial rescue package.
"Financial stocks are certainly going to be under pressure again with German mortgage lender Hypo Real Estate being the latest to receive state aid but the overall impact is going to cross all sectors with the prospect of slowing demand weighing on all (company) heavyweights," said Buckland.
In an effort to keep credit flowing, global central banks pumped billions of extra dollars into short-term lending markets in what has become a daily effort to keep cash moving in a critical network.
Markets were looking ahead to a meeting Friday of finance chiefs from the Group of Seven rich nations, waiting for any announcements on coordinated action such as liquidity injections or interest rate cuts, dealers said.
A speech Tuesday by US Federal Reserve Chairman Ben Bernanke would also be closely watched for any clues on the possibility of a US interest rate cut.
The Bank of England was expected to cut British borrowing costs by at least a quarter of a percentage point when it meets on Thursday, with many hoping for joint action by the world's central banks.
