Global stock markets hit by second day of turmoil
LONDON (AFP) — Stock market turmoil swept around the world again Tuesday, with Asian shares pummeled by fears of a US recession before hopes of international action helped Europe put up resistance.
Oil, gold and other key commodities were also hit by the spreading worries that troubles in the United States could drag down the global economy.
After what one British newspaper called "Manic Monday", European shares rode a roller-coaster as sharp losses at the open gave way to modest rises in London and Paris, amid talk of coordinated interest rate cuts by global central banks, dealers said.
Asian equities slumped earlier, with Japanese share prices hitting a 28-month low and Hong Kong closing down almost nine percent. Traders were nervously waiting for Wall Street to reopen after a long holiday weekend.
"We are hearing rumours of a coordinated rate cut by the US, UK and ECB which has helped the (London) market to move back into positive territory," said Mark Priest, head of equity sales at Tradindex.
Near midday, the London FTSE 100 index was up 0.77 percent at 5,621.10 points having opened 2.6 percent lower.
In Paris the CAC 40 was up 0.85 percent at 4,784.97 points following an opening loss of 2.57 percent, while in Frankfurt the DAX showed a drop of 0.65 percent at 6,745.92 after falling 5.44 percent at one point.
European exchanges on Monday suffered their biggest one-day falls since September 11, 2001 attacks on the United States.
Because of the Wall Street holiday, dealers initially said they had no fresh lead to halt the global rout set off by disappointment in President George W. Bush's economic stimulus package unveiled Friday.
The US market was expected to fall heavily when it reopens after Japanese share prices tumbled 5.65 percent to a 28-month low on Tuesday.
"The biggest two-day rout in 17 years for the Nikkei 225 (in Tokyo) suggests another large-scale sell-off for global equity markets today with the US equity indices potentially surpassing the one-day plunge recorded on the first trading day after 11th September 2001," said Derek Halpenny of The Bank of Tokyo-Mitsubishi UFJ in London.
Dealers said Bush's announcement last Friday of 140 billion dollars (97 billion euros) in temporary tax cuts and other measures to ward off a recession in the world's biggest economy was not good enough.
French Finance Minister Christine Lagarde said Bush must do more to explain how he will inject the funds into the US economy.
"For the moment, it is a bit vague," she told French radio.
"He has to explain a lot better where all this is going and at what speed," she told Europe 1.
In Brussels, the European Union's top economics official insisted that the global economy did not face a recession.
"It's not about a global recession. It's about the risk of a US recession," Economic and Monetary Affairs Commissioner Joaquin Almunia said as he arrived for talks with EU finance ministers.
"The question is how the US will avoid a recession," Almunia said.
"I hope that they will be able to avoid a recession and in this case I think calm will come back."
Trading was briefly suspended in South Korea and India on Tuesday and Hong Kong share prices suffered their biggest ever one-day fall, closing down 8.7 percent, as investors dumped stocks on fears of a US recession.
China's main index shed 7.22 percent, Sydney plunged 7.1 percent, and Indian share prices closed down 4.97 percent.
"Although there are few economic indicators this week, the market is expecting US authorities to say or do something to tackle this problem -- other than rate cuts -- that would calm down markets," said Toshihiro Matsuno, market research head at SMBC Friend Securities.
Oil prices accelerated their plunge on deepening worries about a potential drop in energy demand.
In Singapore, New York's main contract, light sweet crude for February delivery, was 3.87 dollars lower at 86.70 dollars per barrel from its close of 90.57 dollars a barrel Friday.
Gold prices were lower at about 850 dollars an ounce in Hong Kong against 861 on Monday.
