World markets slide again as recession fears resurface
• FTSE 100 down 228 points at 4166
• Dow Jones loses 2.4%
* Graeme Wearden and Julia Kollewe
* Wednesday October 15 2008 15.15 BST
The relief rally on world stockmarkets petered out today as fears of a global recession sent shares falling worldwide.
The optimism that followed the various US and European banking rescue plans now appears to have evaporated, as investors digested the impact of slowing economic growth.
In London, the FTSE 100 fell 5.2% - wiping out all of yesterday's gains. The mood darkened after the latest unemployment figures showed another sharp rise, as the impact of the financial crisis was felt across the UK economy. By 3pm the index of leading shares was down 228.4 points at 4165.9, with most Asian markets having fallen overnight.
On Wall Street, the Dow Jones industrial average lost 222 points to 9100, a fall of 2.37%. Stocks were dragged down by news that US retail sales suffered their biggest drop in more than three years, heightening fears of a deep recession in the world's largest economy.
Rio Tinto spread alarm across the mining sector this morning when it warned that demand from China is slowing down. There are already fears that the global financial turmoil will wound the Chinese economy, hitting imports, exports, and demand for raw materials and energy.
Last night the Dow closed down 0.8% at 9310 points after the Bush administration reluctantly followed Britain's lead by investing $250bn (£143bn) in taking minority stakes in nine leading banks including Goldman Sachs, JP Morgan, Bank of America and Citigroup.
David Evans, market analyst at BetOnMarkets, said: "While some investors might attribute the lower opening in London to profit taking, others are worried that the sagging corporate profits will overshadow the bail-out."
Christian Gattiker at Bank Julius Baer said the volatility in the markets over the last few days was a "Black Swan" event. "First we had relief when the bank guarantees were agreed, but now we have a haggling process by the banks," he said. "There's not a lot to cheer about."
In Japan, the Nikkei index which gained 14% yesterday in its biggest ever one-day jump, closed up another 1% today. Figures showing a 20% surge in imports while exports stagnated heightened fears of recession in Japan's export-dependent economy.
Other Asian markets were more gloomy. Hong Kong's Hang Seng fell over 5%, while South Korea's leading index lost 2%. The Australian stock exchange was down 1%. The Shanghai Composite and the Taiex in Taiwan both fell almost 1%.
In India, shares slid 3.5% as finance minister Palaniappan Chidambaram said interbank lending still remained constrained, and the government and the central bank had agreed measures to address the problem.
Evans noted that oil has tracked swings in stockmarkets this month as the credit crisis deepened. "Oil traders will have a full plate tomorrow as they await the release of the inventory supplies data. There is a strong possibility that oil will touch the $75 per barrel level before stabilising," he said.
Oil prices fell to $78 a barrel this morning. Light, sweet crude for November delivery fell 72 cents to $77.91 a barrel then settled at $78.52.
"People are worried that the world economy is heading for recession," said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney. "The bail-out may save the banks, but companies are still laying off workers and demand is going to suffer."
Click to view image: '238927-checkoutofamericandream.jpg'
|Liveleak on Facebook|