Fri, Oct 17, 2008 - Page 1 News List

Recession fears drive global stocks lower

‘INSUFFICIENT’ US retail sales fell 1.2 percent last month, nearly double the 0.7 percent analysts expected. The Dow Jones showed its second-biggest point loss ever

AP AND AFP , HONG KONG AND BRUSSELS

World stocks tumbled yesterday, with Tokyo’s market plunging more than 11 percent, after another dive on Wall Street as worse-than-expected data about the US economy heightened fears of a global recession.

Japanese Prime Minister Taro Aso blamed the renewed drop in markets, which had rebounded earlier this week, on investor concerns that the US government’s US$700 billion bank bailout was insufficient.

“Since it was insufficient, the market is again falling sharply,” Aso told lawmakers.

He did not elaborate.

Tokyo’s Nikkei 225 stock average slid 1,089.02 points, or 11.41 percent, to 8,458.45, its biggest drop since the 1987 stock market crash.

In South Korea, the main index dropped 9.25 percent after Standard & Poor’s said it may downgrade the credit ratings of some of the country’s leading banks. The ratings agency warned the credit crisis could make it difficult for the companies to refinance maturing debt.

Hong Kong’s key index trimmed losses, closing down 4.8 percent after falling more than 8 percent earlier, while Taiwan’s TAIEX finished 3.25 percent lower.

Benchmarks in Britain, Germany and France opened about 3 percent lower. Russia’s RTS also fell back.

Investors were unnerved by US data showing the country’s retail sales fell 1.2 percent last month almost double the 0.7 percent decline analysts expected — clear evidence that consumer spending, which accounts for more than two-thirds of US economic activity, was weakening.

That was followed by more bearish data from the US Federal Reserve that showed the economy continued to slow in the early fall as financial and credit market problems took a turn for the worse.

All told, the readings provided some of the most ominous signs to date that the world’s largest economy — a critical export market for Asia — was sliding into recession, if not already in one.

In New York on Wednesday, the Dow Jones Industrial Average ended down 733.08, or 7.87 percent, at 8,577.91 — its second-biggest point loss ever.

Facing an economic downturn and the worst financial crisis since the Great Depression, EU leaders pushed yesterday for increased oversight in their own backyard after the recent turmoil on the money markets.

In a draft statement that was likely to be endorsed at the end of the two-day summit, the 27 EU leaders reiterated plans to set up a financial crisis cell that would act as an early warning system and revived a long-talked about plan to beef up Europe-wide supervision of cross-border finance groups.

All 27 EU leaders on Wednesday threw their support behind measures taken by members of the eurozone to safeguard banks, which include plans for governments to guarantee over 1 trillion euros (US$1.35 trillion) in interbank loans.

EU leaders also pushed for a sweeping revamp of the international financial architecture.

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