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Footsie tumbles in wake of recession woes on Wall Street
Hugo Duncan02.12.08
Shares in London tumbled again today, sending the FTSE 100 back below the 4000 mark.
Hopes for a year-end rally faded as the blue chip index of leading shares fell 89.66 points to 3975.83.
It followed sharp falls on Wall Street last night and Asia this morning after a slew of dismal economic news reminded investors just how bad the recession could be.
The National Bureau of Economic Research, the arbiter on the US economy, said America was already in its third longest recession since the Great Depression. The Reserve Bank of Australia underlined the nature of the global crisis by cutting interest rates by a full percentage point to 4.25%.
The heavy selling of shares around the world showed that last week was nothing more than a bear market rally following the bailout of Citigroup.
The Dow Jones Industrial Average dived 679.95 points to 8149.09 in New York last night - a fall of nearly 8% - while the Nikkei was down 6% in Japan this morning and the Hang Seng fell 5% in Hong Kong. In Europe, the Cac and Dax were off more than 1%.
The Footsie fell 5% yesterday and has now lost nearly 2500 points so far this year - 38% - costing investors a staggering £590 billion.
Sterling was also under pressure following yesterday's dramatic plunge, unchanged against the dollar at $1.4872. The pound has been hit by fears over the state of the UK economy and soaring levels of Government debt, as well as growing expectations interest rates will be slashed again this week.
The Bank has lowered rates from 5% to 3% in the past two months and the City is betting on a cut to 2% or even lower on Thursday. That could be good news for shares in the short-term but analysts warned that in the long-term it showed how weak the economy is.
In America financial stocks led the slide as the optimism after the Citigroup bailout evaporated. Sentiment was hit by rumours of a profits warning from giant General Electric. "It only took the whiff of a scare story to bring the markets tumbling down," said Chris Hossain of ODL Securities.
Reader views (1)
Is it now not abundantly clear that the UK Government, in line with other countries Governments, do not have a clue how to rescue the worlds economies.
They have spent an estimated £2.5 Trillion in various bailouts and loans to banks little realising that this would not work.
Ninety percent of Britain's wealthy is generated by the small to medium businesses (SME's) and yet there has been no effective help to the sector by way of direct subsidies to see us through the next 12 months.
So much could have been done, a freeze on Non Domestic Rates, non payment of vat for a year (not just a suspension). A removal of the employer element of NI or at least a halving. The list goes on but the net result would be SME's surviving, keeping millions in employment. Allowing customer reduction, which would then genuinely re-inflate the economy.
However the most beneficial step would be to exit the EU and save Britain PLC £60 billion a year, and free us up to once again trade globally without constraint. It is not a coincidence that Norway and Switzerland have not been dramatically affected by the crisis, being able without hindrance to protect their own economies.
I sincerely hope that Labour call a snap election before we are all bankrupt.
- Robert Feal-Martinez, Swindon
