Financial markets remain in free fall

[Thinking Man's Idiot]

Financial markets remain in free fall

(Friday 10 October 2008)






CRISIS: A stock broker in China looking on in disbelief at the markets.


STOCK markets tumbled across Asia and Europe on Friday, extending a selling stampede that began on Wall Street on Thursday.


Co-ordinated interest rate cuts by the world's central banks in an attempt to thaw frozen credit markets and boost investor confidence fell flat, as markets remain gripped by fears about the scale and depth of the likely global recession.

Thursday marked the first anniversary of the day that the Dow Jones industrial index closed at its record high of 14,164.

But the global crisis in capitalism that has since ensued made on Friday one of the worst days in Wall Street history, with the Dow losing 679 points or 7.3 per cent off its value in one day and 39 per cent in the past year.

Financial analysts Standard & Poor's chief economist David Whys admitted: "Right now, the market is just panicked. Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress."

Asian markets followed suit, with key indices dropping 9.6 per cent in Japan, 8 per cent in India and 7.2 per cent in Hong Kong.

India's central bank almost immediately announced an additional 1 per cent cut in the cash reserve ratio to 7.5 per cent.

The move will pour 600 billion rupees (£7.2 billion) of government reserves into the markets.

Even China's buoyant stock markets were affected, with the Shanghai Composite Index closing 3.57 per cent down and the Shenzhen Composite Index for China's smaller second market down 5.54 per cent.

The central bank initially cut the cash reserve ratio to 8.5 per cent four days ago in a policy reversal of months of monetary tightening to curb inflation.

European stocks slumped by midday, with indices losing 7.3 per cent in London, 7.7 per cent in Germany and 7.5 per cent in Paris by lunch before plunging further in the afternoon.

Panic selling forced stock exchanges in Austria, Russia and Indonesia to suspend trading and the rout on the Australian markets prompted traders to dub on Friday "Black Friday."

Japanese firm Shinko Securities senior strategist Yutaka Miura said: "Selling is unstoppable in New York and Tokyo. Investors were gripped by fear."