A global equities sell-off gathered speed on Friday as nervous investors were hit by growing United States recession fears, a plunging dollar and record oil prices, dealers said.
European markets fell after sharp losses earlier in Asia and overnight on Wall Street following more bad news on the US subprime home-loan crisis.
Tokyo sank 3,3% to a six-week low, Australian shares shed 3,2% and Hong Kong was off 3,6% as investors dumped shares after a string of gloomy reports about the global credit crunch sparked by the collapse of the US housing market.
In midday European trade, London was down 1,25%, Frankfurt dropped 1,44% and Paris shed 1,47%.
“The story hasn’t changed; it is still concerns around the subprime fall-out and in particular concerns about the US recessionary situation,” said Hargreaves Lansdown analyst Richard Hunter.
“US economists have been debating for some time whether they are travelling towards a recession or whether they have already arrived.
“Within the last few days, that consensus might have just tipped towards the fact that they are in a recessionary situation, which has implications for the global economy.”
On the foreign-exchange market on Friday, the euro rocketed to a record high 1,5431 dollars. Investors fear that the soaring European single currency makes eurozone exports on to international markets less competitive.
At the same time, oil prices are hitting record highs close to $106 per barrel, boosted by the weak dollar and tight energy supplies. That ramps up companies’ costs and eats into profits.
“There’s really nowhere to hide in this market,” said Marcus Droga, an adviser at Macquarie Private Wealth in Sydney. “All sectors are down.”
Markets took their cue from Wall Street, which tumbled overnight as Thornburg Mortgage and a bond fund from the Carlyle Group became the latest to reveal problems with US mortgage-related investments.
The bad news deepened when the US Federal Reserve announced that debt of American households had exceeded equity for the first time since the Fed began tracking the figures in 1945. — AFP