More downside to come...
AP
World stocks fall sharply again
Friday October 10, 8:08 am ET
By Pan Pylas, Associated Press Business Writer
World stocks slump again as fear pushes interbank lending rates higher; Dow futures point down
LONDON (AP) -- European stock markets slumped further on Friday following massive losses on Wall Street and Asia on mounting fears that this week's efforts by central banks and governments to break the logjam in credit markets have failed to ease lending rates between banks.
At midday London time, the FTSE 100 index of leading British shares was down 328.03, or 7.6 percent, at 3,985.77, below the 4,000 mark earlier for the first time in five years. Germany's DAX was 399.92, or 8.2 percent, at 4,487.08, and France's CAC-40 was 254.03, or 7.4 percent lower at 3,188.67.
Trading has been suspended for various times in Austria, Russia, Iceland, Romania and Ukraine while Milan suspended share dealings in nearly half of its stocks because of excessive losses.
Despite the coordinated interest rate reductions announced on Wednesday, and massive liquidity boosts, the rates banks lend to each other continue to rise. This is ominous because it means banks are afraid to lend to each other, and raises the chance that they and other businesses won't get the credit they need to operate.
The London Interbank Offered Rate, or Libor, for three-month borrowing in dollars has jumped another 0.07 percent to 4.82 percent, two percentage points higher than the rate just a month ago, and despite this week's half point rate cut from the U.S. Federal Reserve and other central banks.
"That's torrid and continuing to send the wrong message...policy actions are clearly going over the heads of the markets," said Howard Wheeldon, senior strategist at BGC Partners.
"This is capitulation in a way," he said, using the markets term for the moment when the last holdouts have given up and decided to sell.
This week's coordinated interest rate cuts by the world's central banks to thaw frozen credit markets and boost investor confidence have fallen flat as markets remain gripped by fears about the scale and depth of the likely global recession.
The latest woes in Europe came after the Dow Jones index in the U.S. closed 678.91 or, 7.3 percent lower, at 8,579.19, its first close below 9,000 in five years. The slide on the Dow was partly fueled by the decision of credit-rating agency Standard & Poor's to review its rating on General Motors Corp.
The Dow's seven-day decline of 20.9 percent is the largest since the seven-day plunge ending Oct. 26, 1987, when the Dow lost 23.8 percent. That sell-off included Black Monday, the Oct. 19, 1987 market crash that saw the Dow fall nearly 23 percent in a single day.
The losing stretch looks like it will rise to eight. Dow Jones industrials futures plunged 250 points ahead of the opening bell in New York.
In Japan, the benchmark Nikkei 225 index in Japan 881.06 points, or 9.6 percent, to 8,276.43, its lowest closing level since May 2003. It was its biggest one-day percentage loss since the stock market crash of October 1987 and meant that the Nikkei lost nearly a quarter of its value during the week.
Kenji Akasaka, 69, president of a local printing company, said he had never seen it this bad in the 40 years he has traded stocks. He said he invests mainly in blue-chips including Toyota Motor Corp. and Nintendo Co., both of which have lost about half their value over the last year.
"I pray before I go to bed that the Dow will recover," said Akasaka, 69, as he scanned a monitor displaying the latest market levels.
Finance ministers and central bankers from the Group of Seven industrialized nations are due to meet later Friday in Washington to address the financial meltdown but analysts are skeptical that they can do anything to soothe concerns about the world economy. U.S. President George W. Bush is due to make an address to the American people later in the day.
Gordon Brown, the British Prime Minister, has called for a "global solution" to the world financial crisis and is urging countries around the world to follow Britain's lead in buying stakes in troubled banks in return for some element of control.
Few places around the world have escaped the deepening gloom. In Australia, where the S&P/ASX200 plummeted a record 8.3 percent, market watchers were calling it "Black Friday." Key indexes in Hong Kong, Singapore, the Philippines and India were all down about 8 percent. South Korea's Kospi closed down 4.1 percent, while the Shanghai Composite Index posted a more moderate decline of 2.8 percent.
And in Indonesia, authorities suspended trading indefinitely on the Jakarta Stock Exchange after they had halted trading Wednesday after the index plunged more than 10 percent.
It's not just stocks that are taking a hammering. Oil prices continue to plummet and have fallen to a one-year low below $83 a barrel while the British pound has been sold heavily, falling below $1.70. The Japanese yen and gold remain in demand as safe-haven assets.
Associated Press writers Tomoko A. Hosaka and Shino Yuasa in Tokyo, Zakki Hakim in Jakarata, Indonesia, Dikky Sinn in Hong Kong contributed to this report.
