Investors continued to pull funds away from stocks — including from emerging markets with their solidly growing economies — and shifted instead into the perceived safety of assets like U.S. Treasury bonds, German bunds and gold.
In London, traders were awaiting an important jobs report from Washington later in the day for more clues on the health of the U.S. economy. A weak number, they said, had the potential to intensify the downward selling spiral seen this week.
Luc Van Heden, chief strategist at KBC Asset Management in Brussels, said fears of a “double dip” in U.S. growth, where the recovery falters and turns into a second recession, were becoming even more of a concern than the sovereign debt crisis in Europe.
“We’ve known about the euro’s debt crisis for months,” he said. “Fears of a double dip in the U.S. are making the market very, very nervous at the moment.”
Mr. Van Heden said he thought it would take a really strong labor report — perhaps with the addition of 150,000 or so jobs in July — to durably lift investor sentiment.
China, as the United States’s largest foreign creditor, is closely watching developments there and the impact these may have on the value of China’s holdings. On Friday, the Chinese foreign minister, Yang Jiechi, said he hoped the United States would take “responsible monetary policies” to support the global economy, and “take tangible measures to protect the safety of assets” held by foreign nations.
China has increased its holdings of euro bonds in recent years, Mr. Yang said in a written response to questions from the Polish press during a visit to that country. He added that China believed Europe could overcome its “temporary difficulties,” and would continue to support Europe and the euro in the future.
Chancellor Angela Merkel of Germany and the French president Nicholas Sarkozy were interrupting their vacations Friday to hold a telephone conference on the euro zone debt crisis.
Stock markets in Europe opened sharply lower after steep losses at the end of the trading day on Thursday, then struggled to regain ground.
The FTSE-100 in London and the DAX in Frankfurt were each down around 3 percent in morning trading, while the CAC40 in Paris and the Euro Stoxx 50 Index of euro-zone blue chips were both off about 1.5 percent. Yields on Italy and Spanish 10-year yields whipsawed, as in recent days, but remained above the stressed level of 6 percent.
Futures on the Standard Poor’s 500 were also down, indicating another weak opening in New York.
The Nikkei 225 in Tokyo and the Kospi in Seoul both closed 3.7 percent lower. The Taiex in Taipei slumped 5.6 percent, and the Australian market shed 4 percent. The Hang Seng in Hong Kong closed down 4.3 percent.
Neither the Japanese central bank’s efforts on Thursday to dampen the rise of the yen, nor the European Central Bank’s move to buy bonds of some European countries served to reassure the markets.
The bank intervened with a show of support to buy bonds of some smaller countries, but not Italy and Spain, whose mounting troubles have come into the spotlight. This was taken as a sign that the recent rescue packages by Europe could soon be overwhelmed by the huge debt burdens in those two countries.
Analysts said the market still might have further to fall, as investors reassess the dimming economic prospects. And some in the markets are already questioning whether the Federal Reserve has done enough to mend the U.S. economy and whether it could soon take further steps to stimulate growth.
Wall Street saw the worst day in more than two years Thursday, with the Dow Jones industrial average ending down 4.3 percent, and the broader Standard Poor’s 500 finishing 4.8 percent lower.
The S. P. 500 has now fallen 10.7 percent from 1,345 on July 22, underlining the new negative investment sentiment.
“We are now in correction mode,” said Sam Stovall, chief investment strategist at Standard Poor’s. “We could have another couple of weeks to go before it bottoms.”
The yen, which had weakened against the U.S. dollar after the Japanese central bank intervened in the currency markets on Thursday to halt the Japanese currency’s ascent, crawled higher again on Friday, to 78.6 yen per dollar.
The Japanese Economics Minister, Kaoru Yosano, suggested on Friday that more interventions may follow.
“We will continue to intervene at the most effective moments,” Mr. Yosano told reporters. “It would be rash to assume a one-off action, and we will continue to assess the situation going forward.”
Elsewhere in the region, the Australian central bank underlined the general unease by lowering its economic growth forecast for this year. Although ravenous demand from China will continue to buoy Australia’s commodities sector, the bank cited the sovereign debt problems in other parts of the world as a risk.
With investors in the United States already focusing anew on fragile economic growth and high unemployment, waves of selling of stocks began late in the trading day in Europe and continued throughout the day Thursday in the United States.
The last time the market was in a correction was last summer, when it fell 16 percent before recovering.
Analysts said credit markets were still healthy and the United States was now stronger than just a few years ago, so that a repeat of the financial crisis was unlikely.
“There is a huge difference — during the financial crisis the banking sector broke down. Right now it’s a crisis of confidence based on weak economies but the banking sector is not broken,” said Reena Aggarwal, professor of finance at Georgetown University.
The Vix, which measures the implied volatility of options on the S. P. 500 index, and is called the fear index by traders, spiked on Thursday, though it is still much lower than during the depths of the financial crisis in 2008.
Washington’s reaction to the market’s tumble was muted. The Treasury Department said it did not plan to issue any statements or provide officials to comment.
“Markets go up and down,” said the White House spokesman, Jay Carney. “We obviously are monitoring the situation in Europe closely.”
Graham Bowley contributed reporting from New York, Hiroko Tabuchi from Tokyo and David Barboza from Shanghai.
.
Article source: http://www.nytimes.com/2011/08/06/business/daily-stock-market-activity.html?partner=rss&emc=rss
Speak Your Mind
You must be logged in to post a comment.