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Wall Street opens on downward trend

Text by AFP

Latest update : 2008-10-27

The Dow fell 1.73% in early trading Monday, on the footsteps of sharp losses suffered by European markets, which had dropped between 4 and 6% by midday Monday in the FTSE, DAX and CAC 40.

US stocks opened weaker Monday amid more brutal declines in global markets and rising fears of a major worldwide recession.
   
The Dow Jones industrials fell 144.88 points (1.73 percent) to 8,234.07 8,234.07 in the first trades while the Nasdaq slumped 26.75 points (1.72 percent) to 1,525.28.
   
The broad-market Standard & Poor's 500 index lost 16.81 points (1.92) to 859.96.
  
As a new survey showed business confidence in Germany, Europe's number one economy, at its lowest point for more than five years, global efforts to revive spirits showed little sign of working.
  
The IMF unveiled rescue plans for Ukraine and Hungary, South Korea slashed its key interest rate, Japan announced fresh action to boost its ailing stock market and Australia's central bank intervened to prop up its currency.
  
The European Central Bank also announced one-week dollar loans against euro cash as part of its efforts to keep interbank money markets flowing.
  
But the moves failed to restore calm to the markets as Tokyo's main index hit a 26-year low while Europe's main stock exchanges nosedived at the start of the trading week.
  
And on the oil market, Brent crude prices fell below 60 dollars per barrel as traders responded to the potential impact of recession on energy demand.
  
Dealing meanwhile was suspended on the Thai stock exchange towards the end of its trading day after a 10 percent fall, while Bucharest did likewise following falls of almost 13 percent in some share prices.
  
"Fear continues to grip global markets," said CMC Markets analyst James Hughes.
  
The G7 club of rich nations vowed to cooperate to stabilise the system, and voiced concern about "excessive volatility" in the Japanese yen.
  
Japan's Nikkei index plunged 6.36 percent by the close, hitting the lowest level since October 1982 before the economic bubble.
  
It was similarly turbulent across Asia. Hong Kong closed 12.2 percent down and Sydney still closed down 1.6 percent.
  
There were also heavy falls in early trade in Europe, with London's FTSE 100 index of top shares plunging 5.62 percent to 3,665.21 points, striking a level last seen on April 1, 2003.
  
Elsewhere, Paris stocks sank more than six percent and Frankfurt fell 5.42 percent, before both markets trimmed their losses somewhat.
  
Bucking the trend, Seoul recovered from heavy early losses to close up 0.8 percent after South Korea's central bank cut its key interest rate by 75 basis points -- its largest reduction yet.
  
The statement by the G7 key economies -- Britain, Canada, France, Germany, Italy, Japan and the United States -- sought to calm nerves by affirming their "shared interest in a strong and stable international financial system.
  
"We continue to monitor markets closely and cooperate as appropriate," the statement from their finance ministers and central bank chiefs said.
  
They also warned that the yen's volatility posed "possible adverse implications for economic and financial stability," but dealers said the statement lacked bite and may show the G7 had no stomach for intervention.
  
The currency, which has been rising as investors seek cover from the market turmoil by unwinding bets funded with cheap Japanese credit, stayed at 13-year highs against the dollar, which was trading at 93.46 yen in afternoon trade.
  
Meanwhile the euro dived under 1.24 dollars in early trading, hitting the lowest point for more than two years, after a key index showed business confidence dropped in Germany for the fifth month running in October.
  
The monthly business climate index calculated by the economic research institute Ifo fell to 90.2 points in October from 92.9 points in the previous month, its fifth straight drop.
  
That marked the lowest level since May 2003, when it reached 89.6 points.
  
"Germany is heading for a serious recession," warned Bank of America analyst Holger Schmiedling in response to the Ifo data.
  
"With business confidence declining at a record pace, the economy looks set to shrink noticeably in late 2008 and early 2009."
  
On Sunday, the IMF said it would lend 16.5 billion dollars to Ukraine and would announce a "substantial" package for Hungary in the next few days.
  
The deals followed a 2.1-billion-dollar loan to Iceland and came amid calls for assistance from other countries including Belarus and Pakistan.
  
The US Federal Reserve is expected to cut interest rates Wednesday from 1.5 percent, but US gross domestic product figures for the third quarter, due for release Thursday, are set to show a decline.

Date created : 2008-10-27

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