(AFP) – Oct 22, 2008
WASHINGTON (AFP) — Panic-selling returned to global stock markets on Wednesday, with the leading Dow Jones industrial index shedding 5.6 percent, as fears of global recession stalked investors.
News that world leaders are to meet in Washington next month at a summit to discuss the global financial crisis failed to halt a sell-off that began early Wednesday in Asia and accelerated in late US trading.
In falls reminiscent of the worst of the turbulence of the last few weeks, prompted by gloomy outlooks and weak company results, European markets lost four to five percent while the Dow closed down 509.83 points at 8,523.83.
In Brazil, regulators suspended trade on the Sao Paulo stock exchange after the main Bovespa index plunged more than 10 percent, reflecting chaos in fellow Latin American nation Argentina.
The White House announced that leaders of the Group of 20 rich and emerging countries would gather in Washington on November 15, extending efforts to coordinate responses to the worst financial crisis since the Great Depression of the 1930s.
"The president today is going to invite the leaders of a group of 20 countries ... to discuss the financial markets and the global economy," White House spokeswoman Dana Perino told reporters.
"The leaders will review progress being made to address the current financial crisis, advance a common understanding of its causes and in order to avoid a repetition, agree on a common set of principles for reform of the regulatory and institutional regimes for the world's financial sectors."
The announcement came as one of Bush's closest allies, British Prime Minister Gordon Brown, acknowledged his country was "likely" entering recession.
"Having taken action on the banking system, we must now take action on the global financial recession, which is likely to cause recession in ... Britain, too," Brown said in parliament.
Crucial data is expected to show on Friday that the British economy shrank in the third quarter after zero growth in the second. The technical definition of a recession is two straight quarters of negative economic growth.
A similarly gloomy forecast came from Swiss bank UBS, which said Europe faced "inevitable" recession that would begin "almost in sync" with the United States.
The British pound plunged to a five-year trough, closing in New York at 1.6139 dollars. The euro took a pummeling, too, falling below 1.30 dollars for the first time since February 2007 amid interest rate cut expectations.
There were more signs of trouble in emerging markets, with South Africa's rand falling to a six-year low against the dollar.
In Argentina, the main stock market index fell 10.1 percent as police raided the offices of 10 private pension funds that President Cristina Kirchner plans to nationalize.
In Brazil, trading was suspended after stocks fell 10 percent because of falling commodity prices and problems in Argentina. Such a plunge triggers an automatic "cooling off" period of 30 minutes, and the market eventually closed down 10.18 percent.
Crude oil prices careened lower after surging US energy reserves highlighted falling demand in a cooling global economy.
New York's main contract, light sweet crude for December, skidded 5.43 dollars to close at 66.75 dollars a barrel. In London, Brent North Sea crude for December delivery tumbled 5.20 dollars to settle at 64.52 dollars.
On stock markets elsewhere, Japan's Nikkei share index closed down 6.79 percent while Europe's major markets suffered big losses.
The London FTSE 100 index shed 4.46 percent to close at 4,040.89 points, while in Paris the CAC 40 plunged 5.10 percent to 3,298.18. The Dax in Frankfurt fell 4.46 percent to 4,571.07.
In Canada, the Toronto stock exchange shed 558.92 points, or 5.71 percent, to close at 9,236.68. Gold mining and oil shares led the retreat.
The Mexican peso meanwhile closed at a record low 13.74 to the US dollar as the Mexico City stock exchange plunged seven percent.
The turbulence came despite fresh attempts by the US Federal Reserve to restore confidence in the fragile financial system, and new evidence that the credit freeze might be thawing, with interbank lending rates showing modest declines.
In its latest move, the Fed said it would increase the interest rate it pays on excess cash deposited with it by banks, adding to measures to channel funds to lenders and free up credit.
An opinion poll out Wednesday showed declining support for the US government's rescue policy, with more than half of Americans disapproving of the multi-billion dollar bailout plan.
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