Monday November 17, 09:59 PM
Global stocks tumble as Japan falls into recession
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NEW YORK (AFP) - Global stocks saw heavy selling Monday as news that Japan fell into recession and US banking giant Citigroup (NYSE: C - news) 's announcement of 50,000 job cuts heightened fears of a deep global crisis.
Dealers said hopes that a Group of 20 meeting of developed and developing nations in Washington on Saturday would produce concrete action were disappointed, with leaders only calling for greater coordination.
Carl Weinberg, chief economist at High Frequency Economics, said the G20 meeting failed to change the near-term outlook.
"Call us hopelessly optimistic but we would have thought the heads of state of 20 troubled economies, gathering in one place, could have agreed to specific, coordinated actions to address the immediate problem of global recession," Weinberg said.
"No concrete coordinated actions were announced that will change anyone's outlook for the world economy, exchange rates or interest rates."
In New York, the Dow Jones Industrial Average dropped 2.63 percent to 8,273.58 and the Nasdaq (NASDAQ: news) fell 2.29 percent to 1,482.05.
The broad Standard & Poor's 500 index declined 2,58 percent to 850.75.
A series of rally attempts failed to hold and selling accelerated late in the day.
"Wall Street, as well as Main Street, continues to suffer from a massive lack of confidence," said Fred Dickson, market strategist at DA Davidson & Co.
"The flow of redemptions from mutual funds and hedge funds, which forces managers to sell positions to meet the demand, have blunted market rallies and extended an already nasty bear market."
In London, the FTSE 100 index of leading shares closed down 2.38 percent at 4,132.16. The Paris CAC 40 shed 3.32 percent to 3,182.03 and Frankfurt's DAX (Xetra: news) lost 3.25 percent to 4,557.27.
"Investors sold equities on rising concerns of a worsening global recession," said Christine Li at Economy.com. "European bourses were especially hit."
Ryan Detrick at Schaeffer's Investment Research said he believed the market was not yet ready for a comeback.
"I don't think we've seen our ultimate lows," he said. "There is fear in this market but not nearly enough to signal the end of a bear market."
Japan's economy contracted 0.1 percent in the third quarter after 0.9 percent in the second, putting it in recession for the first time in seven years.
Worse still, with the eurozone and Japan in recession and the United States likely to follow suit, this is the first time since World War II that all three regions have been in retreat together, noted Barclays Capital analyst David Woo.
Highlighting the woes, Citigroup said Monday it would cut 50,000 jobs as it struggles with the financial crisis and four consecutive quarterly losses.
In other markets, Brazil's Bovespa (news) lost 0.2 percent and Canada's S&P/TSX index shed 2.88 percent.
In Asian trade earlier, Japanese shares rose 0.71 percent despite the data as investors focussed on the relative improvement from the second quarter downturn.
Hong Kong slipped 0.1 percent on hopes China may cut interest rates again this week while Sydney fell 2.5 percent.
"The global economy has slowed abruptly in recent months," said Lind of RBS (LSE: RBS.L - news) .
"As the US banking system came close to collapse in September, problems in the financial sector spread decisively to the real economy. Europe and Asia quickly followed."
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