Markets, equity and commodity, around the globe slumped once again as fears that the impact of global recession could be more than expected and that the credit crisis could be extending to Asia increased.
Stocks across major Asian markets tanked as China announced the smallest rise in production in seven years, at 8.2%. Adding to the gloom was news from the US that Henry Paulson abandoned his plan to buy devalued mortgage assets. This caused a flutter in Hong Kong and Australia, which had expected the bailout to help some of their banks as well.
In Hong Kong, the benchmark index fell to a two-week low; Hang Seng index lost 5.15% and slumped to 13,221.35 points. ?Why didn?t Paulson think of that when he designed the plan,? asked Tat Auyeung, a fund manager at Apex Capital Management in Hong Kong. ?This gives people another reason to sell. We?re very defensive.?
Australia?s benchmark S&P/ASX 200 Index dropped 5.9% to 3,697.30 at the close of trading, the lowest since October 25, 2004. ?The fact that the US treasury changed its mind has brought uncertainty back in,? said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors. ?The market is worried how big and deep this slowdown is going to be.?
After Asian markets closed, the US labour department reported that applications for unemployment benefits soared to the highest level since the Sept. 11, 2001 terrorist attacks and that the trade deficit shrank more than expected.
US jobless claims shot up by 32,000 last week to a seasonally adjusted 516,000, the highest total in seven years. The tally was much higher than analysts expected and a further indication of how much the labor market is deteriorating amid the shrinking economy. The commerce department said the trade deficit declined by a bigger-than-expected amount in September, falling by 4.4% to $56.5 billion as imports experienced a record plunge.
European stocks continued to fall for the third day as concerns of the financial market turmoil far outweighed speculation that central banks will cut interest rates to prop up economic growth.
In China, production growth was the weakest since November 2001, after eliminating distortions in January and February each year caused by China?s Lunar New Year holiday. The global credit squeeze brought orders for China?s exports to a sudden halt last month. Meanwhile, copper and aluminum fell to three-year lows in London on apprehensions that the fall in China?s industrial output could impact demand.