Times Online and Jane Macartney in Beijing – October 10, 2008
London shares dropped more than 400 points in early trading this morning after a seventh day of devastating falls on Wall Street triggered panic selling across Europe and Asia. Within minutes of opening, the FTSE 100 index fell almost 10 per cent to its worst level since 2002, but within 30 minutes shares staged a mild rally which left the index of Britain's leading companies off 253 points at 4050.
Bank shares took the brunt of the pain as markets gyrated with Barclays off 15.6 per cent, and HSBC down 4.3 per cent. BP fell 8 per cent and Royal Dutch Shell was off 5.9 percent as crude fell 4.6 per cent to a new 12-month low below $84 a barrel. The economic slowdown threatens to weaken demand for oil and some Opec members want to cut production at their November meeting to shore up prices.
France’s CAC 40 and Germany's Dax benchmark index were both down more than 10 per cent.
The falls followed a further plunge in Japan’s Nikkei stock average, which dropped 9.6 per cent, its biggest one-day loss since the 1987 stock market crash, on growing fears that the financial crisis will spark a global recession. The index has fallen 24 per cent this week, more than double the weekly drop immediately after the 1987 market crash.
The sell-off came as Japan’s Yamato Life Insurance company, an unlisted insurer, collapsed with $2.7 billion in debt, although government ministers and analysts were quick to play down the risk of contagion.
However, fear reverberated across Asia and the selling was brutally swift with every market dropping hard at the opening, taking the MSCI index of Asia-Pacific stocks excluding Japan down 3.5 per cent to its lowest since June 2005.
The Indian stock market crashed nearly 10 per cent this morning as policymakers scrambled to avert a run on the rupee.
"This is a bloodbath. It is discomforting that global markets are not reacting to the measures regulators have taken," Hiten Agrawal, head of research with Angel Broking in Bombay, said.
India's central bank reacted to growing pressure on the country's currency by slashing the proportion of cash banks are required to keep in reserve from 9 per cent to 7.5 per cent, which will release about £6 billion into the banking system.
The mood in markets took its tone from Wall Street where US stocks plummeted as investors bet recent worldwide moves to try to thaw frozen credit markets would be insufficient to avert a global recession. The Dow Jones industrial average closed down 7.3 per cent.
The bloodbath quickly spread. Sydney plunged 7.0 per cent, Seoul was down 7.5 per cent, Shanghai lost 3.8 per cent and Hong Kong plummeted 8 per cent.
Indonesia simply announced that trading would be suspended indefinitely – after initially planning to reopen the market after a suspension imposed on Wednesday – to prevent deeper panic.
Oh Hyun-Soek, at Samsung Securities, said: “It’s beyond panic. Concerns about the global economy are deepening further and there is no sign of easing in the global credit crunch.”
The fear was underlined with the cost of protection against defaults in Asia’s sovereign and corporate debt soaring to record highs.
Singapore shares dropped 7.3 per cent at the opening with the Straits Times Index down 76.2 points at 1,971.72 – its lowest since December 2004. South-East Asia’s largest bank, DBS Group, fell 7.6 per cent after government data showed the city state was now in recession.
The island’s economy shrank at a worse-than-expected annualised, seasonally adjusted rate of 6.4 per cent in the third quarter after declining 5.7 per cent in the previous three-month period, putting the economy into a technical recession.
But the hardest fall was in the region’s biggest market. Tokyo’s Nikkei average had sunk 10.6 per cent, or 974.12 points, to finish the morning session at 8,183.37. That surpasses a 9.4 per cent fall earlier in the week and would be the sharpest slide since a 14.9 per cent one-day plunged during the 1987 crash.
Kaoru Yosano, the Economics Minister, urged investors to reach calm judgments in the face of the tumbling markets, stressing that Japan’s regional banks were strong as a whole.
Australian shares dropped to fresh three-year lows with the benchmark S&P/ASX 200 index down 259.2 points at 4,061.7, its lowest since May 2005. Losses this week alone have already reached 15 per cent.
Even Australia's well-capitalised banks were caught up in the downturn, being sold off sharply in line with their troubled international counterparts.
Lucinda Chan, client advisor at Macquarie, said: "These are massive, almost unheard of big days down. These plunges are deep and they hurt deeply. People's nerves are really at the end of their tether. The contagion factor is certainly very clear.”
New Zealand's benchmark NZX-50 index fell 115.6 points, or 3.9 per cent, to 2,828.5. So far this year it has fallen more than 28 per cent.
Hong Kong shares plunged 8.0 per cent in early trade, falling below 15,000 points for the first time in nearly three years. The benchmark blue chip Hang Seng index has fallen 1,211.48 points, or 7.6 per cent, to 14,731.76 minutes after trading started Friday. The index rose 3.3 per cent a day before.
Last updated 12/10/2008