By John Authers in New York and Sundeep Tucker in Hong Kong
October 10 2008
SourceWorld equity markets plunged again on Friday, ending a week-long dive that matched falls seen in the Great Crash of 1929.
Amid mounting fears that the frozen credit and money markets posed an imminent risk of a global recession, the pressure for a co-ordinated rescue by the world’s economic policymakers, meeting in Washington this weekend for the G7 summit, became acute.
As stock markets in Europe and the US plunged hundreds of points within minutes of opening, and US president George W. Bush made a public appearance to urge calm, it quickly became obvious that initial expectations the G7 countries would agree on broad principles, but no specifics, did not match the gravity of the situation.
Investors warned against further falls. “Sadly it is now impossible to call the bottom of this market rout,” said Howard Wheeldon, strategist at the BGC Partners brokerage in London. “Irrational fear has gripped and it seems markets will now trash almost anything that walks. For now it is unstoppable.”
In Asia, most benchmark indices in the region fell by at least 7 per cent. Japan’s Nikkei 225 closed 9.6 per cent lower at 8,276.43 – the first close below 9,000 for five years and the worst one-day fall since 1987.
Hong Kong’s Hang Seng index closed down 7.2 per cent, Australia’s S&P/ASX200 ended 8.3 per cent lower, Singapore’s Straits Times index fell 7.8 per cent while India’s Sensex dropped by 7.1 per cent.
Thailand suspended trading temporarily after prices fell 10 per cent, and its benchmark index closed down 8.7 per cent – while Indonesia’s stock market remained closed for the third day running.
The crisis claimed its first Japanese financial institution, the unlisted Yamato Life Insurance Co, which crashed with $2.7bn in debts, while Singapore said its export-dependent economy had sunk into its first recession in six years, and eased monetary policy. In Australia, Kevin Rudd, prime minister, said the government was considering a proposal that would guarantee the first A$20,000 (US$13,100) in deposit accounts.
The share sell-off was remarkable for its uniformity, with all the world’s major stock indices sustaining losses of more than 20 per cent for the week. In the US, both the Dow Jones Industrial Average and the S&P 500 were on course for falls of more than 20 per cent, far worse than any week during the Great Crash of October and November 1929, or the Black Monday crash of October 1987.
The collapse on Wall Street was matched by falls of 21 per cent for the week in the UK’s FTSE-100, the second worst week in its history, 22 per cent for the FTSE-Eurofirst 300, and 24.3 per cent for Japan’s Nikkei 225. All have fallen about 40 per cent from the peaks they registered in October last year. Late on Friday, Germany signalled it was ready to announce a huge bank recapitalisation programme.
Copyright The Financial Times Limited 2008