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Business

European and US stocks plunge following gloomy data

©

Text by AFP

Latest update : 2008-11-19

Wall Street opened down with the Dow Jones losing 2.42 % after top automakers called for a government bailout; European stocks closed sharply down with Frankfurt losing almost 5%.

US stocks sank Wednesday after gloomy official data underlined the deepening troubles in the world's largest economy, with automakers desperately seeking a government bailout.
  
The Dow Jones Industrial Average dropped 203.82 points (2.42 percent) to 8,220.93 around 1637 GMT and the tech-heavy Nasdaq fell 44.54 points (3.00 percent) to 1,438.73.
  
The broad Standard & Poor's 500 index retreated 26.75 points (3.11 percent) to 832.37.
  
The market extended opening losses after gloomy government reports showed a record fall in consumer prices and a record low in starts on housing construction.
  
The Labor Department reported that US consumer prices plunged 1.0 percent in October, the steepest fall since the data was first published in February 1947.
  
The fall in the consumer price index (CPI) was broad-based, with only food prices still rising.
  
Core CPI, excluding food and energy prices, slipped 0.1 percent.
  
"Consumer price inflation has suddenly screeched into reverse, as the recent abrupt slowdown in world economic growth has led to sharp declines in energy costs, while very weak domestic demand is putting downward pressure on retail prices in many key retail channels, particularly computers and electronics," said Brian Bethune, analyst at IHS Global Insight.
  
The Commerce Department reported separately that Housing starts dropped 4.5 percent to an annualized rate of 791,000 units, the Commerce Department said, the lowest level since it began publishing the data in January 1959.
  
On a 12-month basis housing starts were down a whopping 38.8 percent despite government efforts to revive credit flows and stem a rising tide of foreclosures in the wake of the collapse of the housing market in mid-2006.
  
US officials say that correcting the economy's current downturn requires a recovery in the huge housing market.
  
"Investors continue to digest more reports of a weakening economy while waiting to see if Washington will offer a rescue package to the American auto industry," said Fred Dickson at DA Davidson & Co.
  
Top executives of General Motors, Ford and Chrylser were back on Capitol Hill for the second day in a row, pleading for an emergency bailout from a Senate committee.
  
GM shares skidded 14.29 percent to 2.65 dollars and Ford fell 15.48 percent to 1.42.
  
Among other stocks in focus, struggling Citigroup fell 7.54 percent to 7.73 amid a rout on the financial sector. Bank of America dropped 8.36 percent to 13.92 and JPMorgan Chase was down 8.93 percent at 29.27.
  
Fannie Mae, the government-rescued mortgage finance giant which is at risk of delisting because of its share meltdown, plunged 14.81 percent to 40 cents.
  
Dow heavyweight ExxonMobil fell 1.11 percent to 75.48.
  
On Tuesday the major indices made modest gains a day after heavy losses, with the Dow up 1.83 percent and the Nasdaq up 0.08 percent.
  
Bonds gained. The yield on the 10-year US Treasury bond fell to 3.472 percent from 3.535 percent late Tuesday and that on the 30-year bond dropped to 4.064 percent from 4.144 percent. Bond yields and prices move in opposite directions.

Date created : 2008-11-19

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