VARIOUS: Fears over the state of the U.S. economy hit global stocks

Fears over the state of the U.S. economy, and the impact of a credit crunch, have rippled across financial markets, sending stocks sharply lower and setting up Wall Street for a poor start. European and Asian stocks slumped on Monday (October 22), after weak U.S. corporate results renewed concerns about a housing market slump damaging the world's largest economy. Traders said shares took their cue from Wall Street, which notched up its biggest fall in two months on Friday. Tokyo's Nikkei fell 2.2 percent to a four-week closing low and the benchmark Hang Seng Index ended down 3.7 percent. Exporters bore the brunt of the selloff, hurt by the double-whammy of a weaker dollar and growing worries about the health of the U.S. economy, as the falling dollar makes exports from Asia relatively more expensive and lowers the value of overseas sales, factors that further undermined some of the region's major exporters. In Germany, a 1.25 percent drop in the value of the DAX index in early trading to 7,786 points came as no surprise to traders, as growth fears hit commodity stocks and renewed concerns over the impact of a credit crunch took banks down. Fidel Peter Helmer of Hauck & Aufhaeuser private banking told Reuters Television that European stocks had been affected by significant weakness in the U.S. and Asian markets. Asked about the subprime crisis, Helmer said "we are still in the midst of it." "I don't think anyone believes that the subprime crisis will be overcome in the next few weeks...Newspaper headlines will remind us of this for a while to come," he said. Germany's Commerzbank fell five percent after its chief executive said the subprime crisis will hit its results in the third quarter. Helmer predicted that "there will be several more financial institutions which will make it into the news," referring to Commerzbank and adding "they won't be the only ones." Commerzbank's CEO told German daily Financial Times Deutschland the bank will lose more from investments related to subprime mortgages than the 80 million euros it had previously predicted. Friday's slide on Wall Street was all the more unnerving as it marked the 20th anniversary of 'Black Monday', the 1987 stock market crash. But Henk Potts, equity strategist at Barclays Wealth, said the current slump in stock prices had to be put in perspective. "The Dow fell about 360 points on Friday. If you compare that to Black Monday in today's terms it would have had to fall about three thousand points, so the selloff that we did see on Friday was really nowhere in the same sort of realms that we saw on those tragic days some 20 years ago," Potts said. The selling continued at the start of Monday's trading session on Wall Street. The Dow Jones Industrial Average fell 99 points, or 0.73 percent, to 13,423.

ITN Source | October 22, 2007

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