Shares in export-heavy economies in Asia also fell.
Traders said the declines reflected broad pessimism about the debt crisis in the euro zone and intensifying fears about the economic outlook — despite the release of a joint statement late Thursday in Washington by the world’s major economies that reiterated their commitment to the stability of banks and financial markets.
The statement by the Group of 20 nations did not, however, include commitments to new action, or any talk of additional support for Europe.
“All in all, there appeared to be nothing in the way of concrete new action and markets were generally underwhelmed,” said Sue Trinh, senior currency strategist at RBC Capital Markets.
Andreas Hürkamp, chief equity analyst at Commerzbank in Frankfurt, said declines in commodity prices and fears about a possible near-term default by Greece offset an initial rally Friday.
The Dow Jones industrial average opened down 0.6 percent, or 59.60 points to 10,674.23. The broader Standard Poor’s 500-stock index fell 0.6 percent, and the Nasdaq composite index lost 0.5 percent.
In afternoon trading, Europe’s losses were more severe, though not as bad as Thursday’s. Soon after Wall Street opened, the FTSE 100 in London was down 0.7 percent Friday and the CAC 40 in Paris shed 1.6 percent. The DAX in Frankfurt lost 1.9 percent.
Gold prices fell further. The spot gold price fell 2.7 percent to $1,693.30 an ounce, its lowest level since early August. Benchmark light, sweet crude oil futures contracts also fell, dropping 1 percent to $79.74 a barrel in premarket trading on the New York Mercantile Exchange and extending a sharp decline Thursday.
“Until recently, commodity prices had been stable despite the weakness in equities,” Mr. Hürkamp said. “Now that seems to be changing.”
The weakness in commodities prices suggested to some analysts that investors are starting to bet that the likelihood of a recession in major economies was increasing.
The backdrop remained one of investor alarm about new signs of political paralysis in Washington and Europe’s continued failure to resolve its debt crisis.
The Greek government denied on Friday newspaper reports that it was studying the possibility of an orderly default with 50 percent write-downs for bondholders, Reuters reported.
The United States Federal Reserve said on Wednesday that a complete economic recovery was still years away, adding that the United States economy has “significant downside risks to the economic outlook, including strains in global financial markets.”
The Fed also announced it would buy long-term Treasury bonds and sell short-term bonds to help stimulate lending and growth.
Some analysts were disappointed the Fed did not act more forcefully and they said they had little faith that policy tools like lower interest rates were encouraging consumers and businesses to spend more or to start creating jobs.
“Markets have reacted badly to the Fed’s policy statement and European sovereign debt issues continue to rumble on,” said Dominic Rossi, chief equity investment officer at Fidelity Worldwide Investment. “We should expect news over the next few weeks to deteriorate further.”
In Asia, South Korea’s Kospi registered a 5.7 percent drop, followed by Taiwan’s Taiex index, which fell 3.6 percent, highlighting the dependence of Asia’s export-driven economies on the United States and Europe.
Analysts also said the Kospi drop was partially due to investor concern of a slowdown in the rate of growth in China, South Korea’s largest trading partner. Markets in Hong Kong, Australia, Singapore, Taiwan, Thailand, the Philippines and New Zealand also were lower on Friday, but registered smaller losses than on Thursday.
On Thursday, the Dow Jones fell by 391 points, the second straight day of large losses on Wall Street. The dive coincided with the start of the annual meetings of the International Monetary Fund and World Bank and warnings about the outlook from policy makers like Christine Lagarde, the head of the monetary fund, and the World Bank’s chief, Robert Zoellick.
“At times like these, investors should remember the strong get stronger,” Mr. Rossi said, referring to cash-rich companies. “Markets will have to consolidate so that oligopolies or duopolies are created and the remaining companies have strong cash flow and don’t have to rely on the debt markets.”
Kevin Drew contributed reporting from Hong Kong.
Article source: http://feeds.nytimes.com/click.phdo?i=ea1d1df2da4d9a8918b79aff2b867a85
Speak Your Mind
You must be logged in to post a comment.