Thursday, March 01, 2007
European, Asian markets drop for 2nd day amid global jitters (9:30 a.m.)
LONDON -- Chinese stocks bounced back Wednesday after their biggest decline in a decade, while shares in Europe and Asia fell for a second day amid jitters about possible slowdowns in the Chinese and US economies.
European indexes finished lower even after US markets gained ground, following the previous session's 416-point plunge in the Dow industrials, as investors found some comfort in US Federal Reserve Chairman Ben Bernanke's comment that no single trigger was responsible for Tuesday's selloff.
Analysts said the selloff was most likely a correction to cool overheating markets.
"There is definitely a case for a market correction but as of yet I would not worry about the economic impact," said Holger Schmieding, chief European economist at Bank of America in London.
"This is not something to worry about. There are little ramifications beyond the markets being immediately affected."
In Britain, the benchmark FTSE 100 Index dropped 1.8 percent to close at 6,171.50, while France's CAC 40 fell 1.3 percent to 5,516.32 and Germany's DAX Index slid 1.5 percent to 6,715.44.
The selloff was more pronounced in Asia, with indexes in Japan, South Korea, Singapore, Malaysia, India and Australia sliding more than 2 percent after Wall Street suffered its worst day Tuesday since the Sept. 11, 2001, terrorist attacks.
Japan's Nikkei 225 stock index tumbled 2.85 percent to 17,604.12, while Philippine stocks plunged 7.9 percent, their worst drop since 1997, at the height of the Asian financial crisis.
Major US indexes fluctuated at the opening of trading, but Bernanke, testifying before Congress, appeared to calm the market.
By midday in the US, the Dow Jones industrials were up 0.34 percent at 12,258.14. The Standard & Poor's 500 index rose 0.48 percent at 1,405.72 said Shinichi Ichikawa, an equity strategist with Credit Suisse in Tokyo.
Meanwhile, China's Shanghai Composite Index bounced back 3.9 percent to close at 2,881.07, rebounding from its 8.8 percent plunge Tuesday - its biggest drop in a decade - which triggered the global sell-off.
Bullish comments in China's state-controlled media appeared to reassure anxious domestic investors, who account for virtually all trading.
China will focus on ensuring financial stability and security, the official Xinhua News Agency cited Premier Wen Jiabao as saying in an essay due to be published in Thursday's issue of the Communist Party magazine Qiushi.
Authorities also denied rumors of a 20 percent capital gains tax on stock investments - speculation on which played a role in Tuesday's plunge.
But many analysts cautioned against focusing only on China's role.
"The selloff in equities cannot be blamed wholly on China. This is case of the market flying too close to the sun, and the hot money collapsing," said Torben Krogh Nielsen, an analyst with Saxobank.
"It's a correction that's been seven months coming."
"If there's a larger message behind all this, it's that the era of cheap money is over and you can't blame China for that," concurred David Karsboel, head of market strategy for Saxobank in Copenhagen, Denmark.
Some investors used the drop as an opportunity to go bargain-hunting. Malaysian stocks, after falling as much as 8.2 percent, closed down 3.3 percent. Australian stocks closed down 2.7 percent after falling as much as 3.5 percent.
Many Asian markets were due for a correction after their recent spectacular performance, analysts said.
Benchmark indexes in China, Australia and Singapore had all hit records in February. Before this week's plunge, Malaysian stocks had gained 17 percent this year, while Philippine shares had climbed about 12 percent.
"A lot of that exuberance about just buying anything at all costs just starts to evaporate if the market has big falls like this," said David Halliday, associate director at Macquarie
Equities. "I think the important thing to note is that this hasn't been triggered by an economic, financial or political crisis."
Japan's Chief Cabinet Secretary Yasuhisa Shiozaki echoed that sentiment, trying to quell concerns about the Tokyo market by stressing that overall fundamentals in Japan were still strong.(AP)
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