Page last updated at 22:19 GMT, Wednesday, 22 October 2008 23:19 UK

Recession fears drag shares lower

Traders on Wall Street
Once again, investors are worried about a global recession

US stocks fell sharply in Wednesday trading, echoing declines in Europe and Asia as fears of a global recession continue to hit investor confidence.

Wall Street's main Dow Jones index ended down 5.7% or 514 points to 8,519, while in Europe, the UK's FTSE 100 lost 4.5%, and Germany's Dax fell 4.5%.

Job cuts at Yahoo and drugs firm Merck have increased economic concerns.

The falls came as the White House said a global summit to tackle the financial crisis will be held next month.

The meeting will debate the reforms needed to avoid another financial crisis and look at the progress currently being made.

Leaders from the G20 group of nations - the world's leading industrialised countries and major developing nations - will attend.

Dow Jones intraday chart
*All Times GMT

'Rapid deterioration'

Investor sentiment was also hit on Wednesday by warnings from both UK Prime Minister Gordon Brown and Bank of England Governor Mervyn King that Britain was most likely now entering its first recession in 16 years.

It appears that investors are rethinking their assumptions about the depth and duration of the recession
Fred Dickson, chief market strategist at DA Davidson

"In the short term, the comments made by Mervyn King highlighting the fact that the economic environment has deteriorated quite rapidly over the past year have sent a shudder through the foreign exchange and equity markets," said Henk Potts, an equity strategist at Barclays Wealth.

"There's been a housing slump, the labour market has been suffering and business confidence has been hammered - it's no surprise that investors are spooked," he added.

Stocks were also dragged down by commodity stocks tracking weaker oil and copper prices.

Crude prices were down to 16-month lows on signs of falling demand. US light crude was down $5.52 to $66.66, its lowest point since June 2007.

Brent was down $5.02 to $64.70. Opec is now expected to cut production when it meets on Friday to try to shore up prices.

Widespread sell-off

While the Dow Jones ended down 5.7%, Wall Street's other main share index, the Nasdaq, lost 4.8% or 81 points.

In Europe, Germany's Dax lost 240 points to finish at 4,545, while France's Cac declined 177 points to 3,298.

The UK's FTSE 100 ended down 189 points to 4,041.

FTSE 100 INDEX: 22 October 2008
FTSE 100 intraday chart
*All Times GMT

"It appears that investors are rethinking their assumptions about the depth and duration of the recession," said Fred Dickson, chief market strategist at DA Davidson.

"They are recognizing that the credit crisis has taken an annoying economic slowdown into something far more serious."

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said attention had turned from a banking crisis - which was now considered to have been largely averted - to the possibility of recession.

"Interest rates are likely to be cut but it won't stop the fact that the UK is likely to go into recession, as the US probably is," said Mr Hunter.

"The question is, how long and deep will it be?"

He said UK GDP figures, due to be released on Friday, were likely to be in negative territory and the market was "steeling itself".

'Fundamental fears'

Earlier, Japan's benchmark Nikkei fell 631.56 points, or 6.8%, to close at 8,674.69 - its biggest one-day loss in percentage terms since last Thursday, when it fell 11%. The broader Topix index fell 7.1% to close at 889.23.

The Korea Composite Stock Price Index closed at 1,134.59 points, the lowest close since early autumn 2005, and had touched a low of 1,095.56 earlier in the day.

In other Asian markets, Singapore's benchmark index fell 5% to a four-year low, as banking and property shares slid on worries the global economy is heading for a recession.

In India, the main BSE Index closed down 513.49 points, or 4.81%, at 10,169.90 points.


FTSE 100
23.70 0.44%
19.54 0.34%
Cac 40
14.48 0.38%
Dow Jones
78.53 0.76%
35.31 1.58%
BBC Global 30
20.65 0.36%
Data delayed by at least 15 minutes

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