Page last updated at 22:06 GMT, Thursday, 9 October 2008 23:06 UK

US stocks slide to five-year low

Trader on the New York stock exchange (Oct 9)
The Dow Jones plunged in the last hour of trade as selling gathered pace.

US stocks fell for a seventh straight session, with the blue-chip Dow Jones index tumbling below 9,000 points for the first time in five years.

Investors remained fearful that the financial crisis would lead to a world recession despite concerted action by governments to stem the crisis.

A year ago exactly, the Dow closed at a record high above 14,000 points.

Early gains in European shares faded, with the FTSE 100 ending down 1.2% and France's Cac 40 falling 1.55%.

On Wall Street, the Dow Jones ended down 7.33%, or 678.91 points, to 8579.19 points.

'Pure panic'

Selling gathered pace in the last hour of trading, with no single trigger for the rout.

"We're way beyond fundamentals. This is just pure panic, that's all it is," said Chris Orndorff, head of equity strategy at Payden & Rygel, in Los Angeles.


We've had a few false dawns over the past couple of months and it's too early to call a complete recovery, but there's hope that these measures will get some traction at some point

Richard Hunter
Hargreaves Lansdown stockbrokers

US car maker General Motors was the biggest decliner on the Dow, falling 31% on fears that a recession could hit demand for cars worldwide.

Energy firms were also hit as oil prices fell to below $85 a barrel, underscoring that it is not just financial stocks affected by the panic selling.

"A lot of people believe the bottom has been reached but that doesn't mean volatility hasn't gone away," said Howard Wheeldon, senior strategist at BGC Partners.

"The underlying fear is how much hell we have in terms of recession," he added.

More guarantees

As the turbulent week continued, other developments included:

  • The Dutch government is preparing 20bn euros ($27.4bn) in funding to support financial institutions in the Netherlands during the credit crisis.
  • US Treasury Secretary Henry Paulson is considering capital injections into troubled US banks, a White House spokeswoman said.
  • US President George W. Bush will make a statement on the global financial meltdown around 1000 (1400 GMT) on Friday.
  • The oil producers cartel OPEC will hold an emergency meeting in Vienna on 18 November to discuss the impact of the financial crisis on oil prices, which fell below $85 a barrel.
  • The International Monetary Fund (IMF) has activated an emergency finance mechanism to help countries hit by the financial crisis.
  • The British Bankers' Association said the interbank cost of borrowing overnight had fallen - a day after interest rate cuts and governments provided additional liquidity. However, longer-term lending rates rose to their highest this year.
  • The UK has condemned Iceland's handling of the collapse of its banks and its failure to guarantee British savers' deposits

'False dawns'

Seven central banks on Wednesday cut interest rates in an effort to steady the faltering global economy.

It came after the UK government's announcement of a package of measures aimed at rescuing the banking system.

This package makes available 400bn ($692bn) of fresh money.

There was "an air of cautious optimism" that such measures would have some impact on the financial crisis, said Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers.

FTSE 100 INDEX: 9 October 2008
FTSE 100 intraday chart
*All Times GMT

"Banking shares have been the main beneficiaries of the UK's rescue plan, and the interest rate cuts," he added.

"We've had a few false dawns over the past couple of months and it's too early to call a complete recovery, but there's hope that these measures will get some traction at some point."

Asian stock markets rose, though Japanese shares closed lower.


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