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Thread: Dow futures on wild ride after Fed; Asia plunges

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    Dow futures on wild ride after Fed; Asia plunges

    USA Today

    NEW YORK (AP) U.S. stock futures seesawed Tuesday after the Federal Reserve, responding to a growing financial market crisis, slashed interest rates 0.75 percentage point.
    Dow Jones industrial futures, down more than 500 points, or more than 5%, before the Fed move, were fluctuating violently an hour before the start of trading, but improved to a level where they were down 206, or 1.7%, to 11,900.


    FED CUT: Fed delivers three-quarter-point rate cut

    The Fed move was unsurprising, given that world stock markets were falling precipitously the past two days, and that U.S. stocks had tumbled last week amid growing fears of a recession in the United States. Still, the markets are quite anxious, not sure that even interest rate cuts will lift an economy slammed by an ongoing housing and credit crisis.

    The Fed's move came a week before the central bank's regularly scheduled meeting, a sign that the Fed recognized the seriousness of the world financial situation.

    At 8 a.m. ET, U.S. Treasury Secretary Henry Paulson tried to calm investors by talking to the U.S. Chamber of Commerce about the underlying strength of the economy and the Bush administration's willingness to work with Congress to quickly enact an economic stimulus package.

    Outside the USA, Asia suffered a second big sell-off and stock indexes in Europe plunged, then came back a bit.

    Global investors apparently fear that a possible U.S. recession will cause a worldwide economic slowdown.

    By midday in Europe, the U.K.'s FTSE 100 was down 0.3% at 5,560.90, Germany's DAX down 1.7% at 6,671.82, while France's CAC 40 dropped 1.3% to 4,681.07.

    Overnight, Japan's Nikkei 225 index nose-dived 5.7% its biggest percentage drop in nearly 10 years to 12,573.05, a day after falling 3.9%. Australia's benchmark index sank 7.1%, the market's steepest one-day slide in nearly 20 years.

    Hong Kong's Hang Seng index, which slumped 5.5% Monday, finished down 8.7%. In China, the Shanghai Composite index lost 7.2% to 4,559.75, its lowest close since August.

    European stocks fluctuated wildly, dropping more than 4% and then sharply cutting their losses on market talk of concerted central bank action to stem the fall.

    Indian Finance Minister P. Chidambaram urged investors to remain calm after trading in Mumbai was halted for an hour when the stock market there fell 10% within minutes of opening. The Sensex rebounded some later to finish down 4.6%.

    "There is no reason at all to allow the worries of the Western world to overwhelm us," Chidambaram said.

    Investors have dumped shares in frenetic trading the last two days on worries that the U.S. economy, battered by a credit crisis and housing slump, will shrink in coming months, weakening demand for exports.

    There is also skepticism that American authorities will be able to prevent a recession. The Federal Reserve has indicated it will lower interest rates further, and President Bush has proposed an economic stimulus package that includes $145 billion in tax cuts, but investors around the world are doubtful that the measures will lift the economy quickly.

    "Unless we get some positive 'shock effects,' such as drastic measures from the U.S. government, there is almost no hope for a recovery in stocks," said Koji Takeuchi, senior economist at Mizuho Research Institute in Tokyo.

    Oil and gold prices also fell. Light, sweet crude for February delivery fell to $87.72 a barrel on expectations that slower U.S. growth will lead to less demand for crude. Spot gold, which usually benefits from market uncertainty, fell to a two-week low of $855.20 per troy ounce.

    U.S. markets were closed Monday for a holiday commemorating civil rights leader Martin Luther King Jr. But Wall Street future prices were down sharply, portending a plunge when trading begins at 9:30 a.m. Eastern time.

    Noritsugu Hirakawa, who monitors stock trading at Okasan Securities Co. in Tokyo, said investors were spooked by the drastic falls on Chinese and Indian markets the two emerging economies that are viewed as sustaining global growth even as the U.S. economy sputters.

    "The end to the slides in Asian stocks is nowhere in sight," he said. "There is even speculation that China may be exposed to the U.S. subprime mortgage crisis."

    Indonesia's benchmark index closed the day down 7.7%, Singapore's Straits Times index sank 6% and Taiwan's market fell 6.5%.

    Asian markets have been in a downward spiral for most of January. Since the start of the year, Japan's Nikkei index has tumbled nearly 18%, while the Hang Seng is down a stunning 22%.

    Even the usually upbeat Japanese Economy Minister Hiroko Ota acknowledged that threats were growing.

    "We must take the approach of working together with other nations on this," she said on nationally televised news.
    Last edited by jgdrag; 01-22-2008 at 09:49 AM.
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