Global stock markets traded mixed on Thursday amid recession fears as Wall Street rose, Europe fell for a second day running and Tokyo suffered its worst loss in two decades.
The Dow Jones Industrial Average was up by 0,57% shortly after the start of trading in New York. Nearing the close in European deals, London was down 2,21%, Frankfurt lost 1,23% and Paris shed 3,01%.
Renewed panic had erupted in trading rooms earlier on Thursday, with Tokyo closing down more than 11% and European indices briefly shedding almost 6%.
Nathan Topper at Economy.com said there were signs of improvements in the credit markets that could eventually ease the financial turmoil, reflected in so-called credit spreads and the Libor interbank lending rate.
”Debt markets are showing signs of better health: Treasury yields are up and Libor is down,” he said. ”Credit spreads need to narrow to avoid a severe global recession.”
European Union leaders on Thursday handed French President Nicolas Sarkozy a mandate to press for a sweeping overhaul of the global financial system at a crunch weekend summit with United States President George Bush.
Sarkozy, whose country holds the EU presidency, said there should be no taboos in the talks with his US counterpart at Camp David on Saturday, called in the wake of the global financial crisis, and should address everything from bankers’ bonuses to new roles for the International Monetary Fund.
”We do not have the right to miss this opportunity for reconstructing our system of finance in the 21st century,” Sarkozy said at the end of a two-day EU summit in Brussels dominated by the financial crisis.
Earlier on Thursday, Japan’s Nikkei ended down 11,4%, wiping out most of its gains earlier in the week. It was the index’s second-largest percentage loss to date and the steepest fall since a stock-market crash in October 1987.
”Don’t stand in front of the freight train,” Sonray Capital Markets chief economist Clifford Bennett warned investors. ”This is clearly a panic with further to go. The equity-market game has fundamentally changed.”
Elsewhere, Hong Kong lost 4,8%, Seoul sank 9,4%, Mumbai shed 2,11% and Sydney tumbled 6,7%.
A global recession was the markets’ biggest fear, said CMC Markets head of trading James Foulsham in Australia, describing the day as ”another shocker”.
The Dow sank 7,87% on Wednesday after a dismal US retail sales report and Federal Reserve Chairperson Ben Bernanke said a recovery from the financial crisis would not happen right away.
Oil prices continued to fall on Thursday, with Brent North Sea crude dropping below $68 a barrel for the first time since June 2007.
World stock markets have fallen heavily this year as the global credit crisis brought down once-mighty Wall Street giants Bear Stearns and Lehman Brothers and prompted a raft of government bailouts of troubled Western banks.
The Dow has so far fallen 35%, the Nikkei has lost 45% and the London FTSE 100 is down about 37%.
”The stock market is buried by recession fears,” said Al Goldman at Wachovia Securities.
US retail sales slumped by 1,2% in September, a sign of deeper troubles for an economy hit by the squeeze in credit and the worst financial crisis since the Great Depression.
San Francisco Federal Reserve president Janet Yellen said the US economy was probably already in recession.
Most analysts say a US recession appears virtually certain, as a crippling credit crunch and housing meltdown drags down the rest of the economy despite a $700-billion banking sector rescue plan.
Arab stock markets fell on Thursday for a second day, with Dubai shedding 6,5% but up by 0,2% on the week. — Sapa-AFP