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Crisis hits global stocks and shakes up currencies

European shares slump to 5-1/2-year low, Asian markets tumble

Crisis hits global stocks and shakes up currencies

Stock markets tumbled around the world on Friday as investors fearing a long and deep worldwide recession dumped risky assets far and wide, sending currencies into a tailspin and oil down sharply.
U.S. stocks slumped more than 3 percent, European shares plummeted to their lowest close in five and a half years, and the Japanese market lost nearly 10 percent of its value. Rates on major currencies gyrated wildly amid the frenzied stocks rout.
The yen soared to multiyear highs versus the U.S. dollar and euro on risk aversion, and sterling suffered its biggest one-day drop against the U.S. dollar since September 1992 on signs that the British and euro zone economies were on the ropes.
"This has become much more global than it was two weeks ago. No one or no market is immune," said Robert Macintosh, chief economist at Eaton Vance Corp in Boston.
Data showed Britain's economy contracted in the third quarter for the first time in 16 years while the euro zone's private sector economy shrunk this month at its fastest pace since the monetary union.
Oil tumbled as far as US$62.65 a barrel on expectations the economic downturn would sap fuel demand, taking the steam out of an OPEC agreement to cut output. Gold snapped a three-day losing streak as safe-haven buying emerged, while U.S. government bonds benefited for much of the day as the market's traditional safe haven.
Energy companies also tumbled, dragged down by the more than US$3 drop in the price of oil.
The Dow Jones industrial average was down 312.62 points, or 3.60 percent, at 8,378.63. The Standard & Poor's 500 Index was down 31.50 points, or 3.47 percent, at 876.61. The Nasdaq Composite Index was down 51.88 points, or 3.23 percent, at 1,552.03.
Still, the U.S. losses did not quite live up to investors' worst fears at the start of the day.
Before the market opened, stock futures fell so steeply they had to be frozen after triggering a limit down. Losses at the open were not as severe, however, and by midday, stocks had come off their lows before turning lower once again.
News that existing-home sales in the United States rose 5.5 percent last month - the biggest gain since July 2003 - helped put a floor under sentiment since the housing market has been at the center of the economic troubles.
World stocks, measured by MSCI's all-country world index, were down 4.22 percent but had trimmed their losses after hitting five-year lows during the session. Investors dumped emerging market stocks with particular vigor, pushing them down 7.83 percent.
European shares had their lowest close since mid-2003, with the FTSEurofirst 300 index of top European shares closing down 4.93 percent at 829.73 points.
"I sense we've moved beyond the credit crisis. There's a recognition of the damage inflicted on the global economy, that is the recession, by the credit crisis," said Mike Lenhoff, strategist at Brewin Dolphin.
"It's not just limited to the developed world. You can run but you can't hide anywhere."
Japan's Nikkei tumbled 9.6 percent by the close of trading in Tokyo.


Updated : 2021-08-03 03:14 GMT+08:00