EUROPE AND ASIA:EUROPEAN STOCK markets yesterday endured one of their worst days of trading in 30 years as government efforts to reassure investors fell on deaf ears.
London's FTSE 100 capped its worst week since the crash of October 1987 by falling 381.7 points to 3,932.1, its second biggest points loss ever. It was also below 4,000 for the first time in five years. The Dow Jones Stoxx 600 index of European shares experienced the worst week in its 21-year history as all major European bourses headed futher into the red yesterday.
Although the drop in Dublin's Iseq of 5.5 per cent was considerably less than on most European markets, traders took little comfort. The Iseq index ended a torrid week at 2,871.25, almost 20 per cent down from Monday's open of 3,587.69, effectively wiping €10.4 billion off the value of Irish stocks. During the day, it also hit a new 52-week low of 2751.31. Irish Life Permanent was the strongest performer in Dublin, gaining 5.55 per cent to close on €3.535. In contrast, AIB stocks lost over 7 per cent to close at €4.238.
Traders said there was little logic to the share movements, with fear and uncertainty the prevailing sentiments. Market watchers are now hoping that some sort of global response will emerge from the meeting of G7 finance ministers and the International Monetary Fund in Washington this weekend.
Comments by President Bush that the US is using a "wide range of tools" to stabilise markets and that the $700 billion bailout package would work in time, did little to calm nerves. The SP 500 fell 7 per cent to its lowest level since the outbreak of the Iraq war in 2003, capping its worst week on record. US stocks have now lost $8.3 trillion in value since the start of the year.
There was also no sign of the money markets freeing up. The London interbank offered rate, or Libor, that banks charge each other for such loans, climbed seven basis points to 4.82 per cent, a high for the year.
The markets were not helped by the news that sellers of credit-default protection on bankrupt Lehman Brothers will have to pay holders 91.375 cents on the dollar, setting up the biggest-ever payout in the $55 trillion market.
Meanwhile, after a week of denials, Germany's finance minister agreed that Berlin will have to put in place a broad rescue plan for its banks. "We are in a process where the downward spiral has begun to pick up considerable speed," said Peer Steinbrück in Washington, adding it was clear that "we won't get very much further with case-by-case regulations. We have to try to find a course that will have a stabilising effect for the entire sector".
The Asian markets had set the tone overnight with stark plunges. Investors were clearly spooked by the prospect of the economic crisis translating into a collapse in demand for goods made in the region. In bourses all across the region market players watched Wall Street's seemingly endless downward trajectory with horror and rushed to divest themselves of stocks.
Japan's Nikkei 225 ended down 9.6 per cent yesterday, after losing nearly 25 per cent of its value over the week, its lowest reading in over five years. Australian markets ended down 8.3 per cent, down 16 per cent for the week - the SP/ASX 200 ended at its lowest level in more than five years and saw nearly A$200 billion (€104 billion) in market capital wiped out.
China's stocks slumped five days in a row and the benchmark Shanghai Index, which tracks the bigger of Chinas stock exchanges, lost 3.6 per cent to end at 2,000.57 yesterday. It was the indexs worst week on record. Hong Kong saw 8 per cent declines and Singapore was down 6.6 per cent.
