http://www.businesstimes.com.sg/sub/news/story/0,4574,455093,00.html?
Published September 6, 2011
Torrent of bad news as markets fear the worst
Poll setback in Germany, slowdown in HK and jobs crisis in US add to recession fears
By CONRAD TAN IN SINGAPORE AND NEIL BEHRMANN IN LONDON
Rising concerns, falling stocks: A Korea Exchange Bank dealer against a backdrop of some of the market numbers yesterday
STOCKS across Asia and Europe slumped yesterday amid a slew of bad news, reinforcing fears that the world's biggest economies are sliding back into recession.
Shares of export-oriented firms across Asia were hammered, after the monthly US employment report last Friday showed that the world's biggest economy added no new jobs in August, while the number of new jobs added in July was revised downwards to just 85,000, from 117,000.
In Taiwan, the benchmark Taiex index fell 2.6 per cent, dragged down by shares in exporters such as smartphone maker HTC Corp, which slumped by 4.6 per cent. Hon Hai Precision Industry Co - the anchor company of Foxconn Technology Group, which makes iPhones and iPads for Apple - ended 3.9 per cent lower.
South Korea's Kospi index plunged 4.4 per cent, weighed down by firms such as consumer electronics maker Samsung Electronics and car manufacturer Hyundai Motor.
Financial firms with significant businesses in the US were also hit hard, after the US government on Friday sued 17 banks that included Japan's Nomura Holdings, as well as Barclays, HSBC, Royal Bank of Scotland (RBS), Societe Generale, Credit Suisse and Deutsche Bank in Europe, alleging that they sold nearly US$200 billion worth of home loans to mortgage agencies Fannie Mae and Freddie Mac without disclosing how risky they were.
Adding to the woes, the Hong Kong purchasing managers' index published by HSBC fell to 47.8 in August from 51.4 in July, suggesting that economic activity there may be shrinking. The Hang Seng Index slid 3.0 per cent to end at 19,616.40.
Here, the Straits Times Index fell 2.5 per cent to 2,773.17, with all 30 of its members suffering declines.
The grim sentiment spilled over into European markets, with most major indices across Europe down by 3 per cent or more in early trading. Bank stocks led the decline, with RBS shares plunging more than 10 per cent in London trading.
In the United Kingdom, a monthly index that tracks business activity in services such as financial intermediation, and transport, storage and communication but not retail, fell sharply in August compared to July, suggesting that the pace of expansion is slowing to a crawl.
Also contributing to the worries was the heavy defeat suffered at the polls by German Chancellor Angela Merkel's party in state elections - its fifth election loss this year. The drubbing it received fuelled investors' fears that European leaders' efforts to rescue ailing eurozone countries such as Greece, Portugal, Ireland and Spain could stumble in the face of popular dissent.
Talks among officials from the European Union, the International Monetary Fund and Greece broke off unexpectedly last Friday after it became clear that Greece had yet to meet conditions set for a 110 billion-euro (S$188 billion) loan from the EU and IMF announced earlier.
Some investors now fear that a default by Greece is inevitable and are worried that the fallout could overwhelm other eurozone members also struggling with a mountain of debt.
Such has been the contagion of the crisis that Christine Lagarde, the new IMF managing director, has called for more Keynesian stimulus to counter a recession in Europe and the US. She told German magazine Der Spiegel that the US and Europe should withdraw from fiscal austerity and switch to stimulus measures. The global economy faced a 'threatening downward spiral', she said.
'There has been a clear crisis of confidence that has seriously aggravated the situation,' she said. 'Measures need to be taken to ensure that this vicious circle is broken.'
'It is a combination of slow growth coming out of the financial crisis and heavy sovereign debt,' she added. 'Both fuel serious concerns about the capital and the strength of banks, notably when they hold significant volumes of sovereign bonds. Should banks experience further difficulties, further countries will be stricken. We have to break this cycle.'
Published September 6, 2011
Torrent of bad news as markets fear the worst
Poll setback in Germany, slowdown in HK and jobs crisis in US add to recession fears
By CONRAD TAN IN SINGAPORE AND NEIL BEHRMANN IN LONDON
Rising concerns, falling stocks: A Korea Exchange Bank dealer against a backdrop of some of the market numbers yesterday
STOCKS across Asia and Europe slumped yesterday amid a slew of bad news, reinforcing fears that the world's biggest economies are sliding back into recession.
Shares of export-oriented firms across Asia were hammered, after the monthly US employment report last Friday showed that the world's biggest economy added no new jobs in August, while the number of new jobs added in July was revised downwards to just 85,000, from 117,000.
In Taiwan, the benchmark Taiex index fell 2.6 per cent, dragged down by shares in exporters such as smartphone maker HTC Corp, which slumped by 4.6 per cent. Hon Hai Precision Industry Co - the anchor company of Foxconn Technology Group, which makes iPhones and iPads for Apple - ended 3.9 per cent lower.
South Korea's Kospi index plunged 4.4 per cent, weighed down by firms such as consumer electronics maker Samsung Electronics and car manufacturer Hyundai Motor.
Financial firms with significant businesses in the US were also hit hard, after the US government on Friday sued 17 banks that included Japan's Nomura Holdings, as well as Barclays, HSBC, Royal Bank of Scotland (RBS), Societe Generale, Credit Suisse and Deutsche Bank in Europe, alleging that they sold nearly US$200 billion worth of home loans to mortgage agencies Fannie Mae and Freddie Mac without disclosing how risky they were.
Adding to the woes, the Hong Kong purchasing managers' index published by HSBC fell to 47.8 in August from 51.4 in July, suggesting that economic activity there may be shrinking. The Hang Seng Index slid 3.0 per cent to end at 19,616.40.
Here, the Straits Times Index fell 2.5 per cent to 2,773.17, with all 30 of its members suffering declines.
The grim sentiment spilled over into European markets, with most major indices across Europe down by 3 per cent or more in early trading. Bank stocks led the decline, with RBS shares plunging more than 10 per cent in London trading.
In the United Kingdom, a monthly index that tracks business activity in services such as financial intermediation, and transport, storage and communication but not retail, fell sharply in August compared to July, suggesting that the pace of expansion is slowing to a crawl.
Also contributing to the worries was the heavy defeat suffered at the polls by German Chancellor Angela Merkel's party in state elections - its fifth election loss this year. The drubbing it received fuelled investors' fears that European leaders' efforts to rescue ailing eurozone countries such as Greece, Portugal, Ireland and Spain could stumble in the face of popular dissent.
Talks among officials from the European Union, the International Monetary Fund and Greece broke off unexpectedly last Friday after it became clear that Greece had yet to meet conditions set for a 110 billion-euro (S$188 billion) loan from the EU and IMF announced earlier.
Some investors now fear that a default by Greece is inevitable and are worried that the fallout could overwhelm other eurozone members also struggling with a mountain of debt.
Such has been the contagion of the crisis that Christine Lagarde, the new IMF managing director, has called for more Keynesian stimulus to counter a recession in Europe and the US. She told German magazine Der Spiegel that the US and Europe should withdraw from fiscal austerity and switch to stimulus measures. The global economy faced a 'threatening downward spiral', she said.
'There has been a clear crisis of confidence that has seriously aggravated the situation,' she said. 'Measures need to be taken to ensure that this vicious circle is broken.'
'It is a combination of slow growth coming out of the financial crisis and heavy sovereign debt,' she added. 'Both fuel serious concerns about the capital and the strength of banks, notably when they hold significant volumes of sovereign bonds. Should banks experience further difficulties, further countries will be stricken. We have to break this cycle.'
