World stock markets plunged deep into negative territory on Friday as gloom gathered over the global economy and dismal corporate news left investors stunned.
“Everyone is staring at their screens in disbelief,” said Tom Hougaard, chief market analyst at City Index.
On Wall Street the Dow Jones Industrial Average plunged 4,69% to 8 287,36 in the first 10 minutes of trade.
The Nasdaq saw a dive of 5,41% to 1 517,16.
The Wall Street action followed a tidal wave of panic in markets around the world, sparked by mounting evidence that major economies are heading for recession from a credit crunch and a banking crisis.
“We have now reached a point where fundamentals and long-term valuation considerations do not matter any more for financial markets,” said economist Nouriel Roubini at New York University.
London stocks were down 7,58 % late in the day after recovering from a fall of more than 9%, Frankfurt crashed by 10,13% but was later down 8,71% while Paris tumbled by more than 7% and was 6,05% in the red by late afternoon.
In Asia, Tokyo sank nearly 10%, and Hong Kong wilted as concern grew that the chronic financial crisis was taking a heavy toll on company earnings.
“There is a free fall as most investors are rapidly deleveraging and we are on the verge of a capitulation collapse,” Roubini said.
“What matters now is only flows — rather than stocks and fundamentals — and flows are unidirectional, as everyone is selling and no one is buying, as trying to buy equities is like catching a falling knife,” Roubini said.
“There are no buyers in these dysfunctional markets, only sellers and panic is the ugly state of this destabilizing game.”
The rout that began the day in Asia was driven by corporate earnings news, with technology giant Sony, a bellwether of corporate Japan, forecasting net profit of 150-billion yen ($1,28-billion) for the year to March, down 59% from the previous 12 months.
In Asian trade, Tokyo lost 9,60%, ending below the key 8 000-point level for the first time in more than five years as the yen soared and after the profit warning from tech giant Sony. The Hong Kong market closed with a loss of 8,3%.
South Korean shares dived on Friday by 10,6% — a day after a 7,4% plunge — after the domestic economy grew at its slowest pace for four years and Samsung Electronics reported a sharp drop in quarterly profit.
Sydney ended with a loss of 2,6%, while Indian shares fell almost 11% to a near three-year low.
“The best word to describe what’s going on right now is panic,” said Credit Suisse strategist Satoru Ogasawara. “When you don’t know what will come next, you tend to flee to the safest place.”
The sell-off came as Asian leaders meeting in Beijing agreed to set up an $80-billion fund to fight the global economic crisis.
The deal between South Korea, China, Japan and the 10 members of the Association of South-East Asian Nations is the first major coordinated regional action since the full force of the financial turmoil erupted last month.
European investors later took their lead from news that the British economy contracted 0,5% in the three months to September in the first quarterly contraction since 1992.
“It was no real surprise to markets that the UK economy shrunk in the third quarter — but the concern now is that the slowdown could end up being much worse than expected,” said IG Index analyst David Jones.– AFP