World markets jittery on US woes

Markets remain on edge

Global share prices have continued their recent volatility on Thursday, as fears remain over the US economy and the weakness of the dollar.

The UK's FTSE 100 index fell in early trading, before rebounding to climb 57 points to 6,128 by mid-afternoon.

Germany's Dax and Paris' Cac were also up, but the main Australian and Hong Kong indexes had earlier ended down.

The volatility follows sharp falls in US stocks on Wednesday. US markets are closed for Thanksgiving on Thursday.

Analysts said that markets probably would be jittery for several months.

Rate cut?

The worry for many investors is that problems in the US housing market, coupled with higher interest rates and a global credit crunch, will spread to the wider economy, slowing annual growth.

We just can't seem to break free of the financial concerns that are out there Bucky Hellwig, Morgan Asset Management

Market expectations of a further US rate cut were buttressed on Tuesday by a statement from the Federal Reserve which lowered its growth forecast for next year, underpinning the fears of a slowdown.

The US central bank now sees the economy growing by between 1.8% and 2.5% in 2008, compared with its previous forecast of between 2.5% to 2.75%.

The outlook for the dollar remains weak given expectations that US interest rates will have to fall to stimulate growth.

Cutting interest rates tends to weaken a currency as investors shift their money to countries and regions where they can get a higher rate of return.

The dollar touched a record low against the euro on Thursday, sliding to $1.4873 against the single European currency. It also fell against the Japanese yen.

"We are looking for continued dollar weakness and would not be surprised to see the euro break $1.50 within weeks rather than months," said Teis Knuthsen, head of currency research at Danske markets in Copenhagen.

"Primarily, it is still the relative economic development between the US versus the rest of the world, combined with the ongoing financial crisis, which is heavily concentrated in the US," he added.

Financial concerns

In the US on Wednesday, the worries saw the Dow Jones index drop 211.1 points, or 1.6%, to 12,799, while the Nasdaq fell 1.3%, or 34.7, to 2,562.2.

"We just can't seem to break free of the financial concerns that are out there," said Bucky Hellwig, of Alabama-based Morgan Asset Management.

"The unwinding of the real estate and the mortgage market continues to weigh on investor concerns."