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(Please, Please give us a “New Global Master”…Purty Please!!!…Paul)

By David Jolly and Bettina Wassener
October 10, 2008

PARIS: Global stocks plummeted Friday, with selling momentum accelerating after a Japanese insurance company was driven out of business by failed investments.

Investors were keeping a close eye on a crisis meeting of Group of 7 nation ministers later Friday in Washington.

“It is a must for the G7 countries, especially the U.S., to make a firm commitment to public fund injections for recapitalization of banks in trouble, in order to see the stock market pull out of the doldrums,” Hideyuki Suzuki, an analyst at Morningstar Japan told Reuters. “If the G-7 nations failed to do so, its raison d’être will be called into question for sure.”

Credit markets remained frozen, with the so-called Ted spread, which measures the gap between yields on safe three-month U.S. government securities and the rate that banks charge each other for loans of the same duration, remained at a record 4.23 percentage points, showing financial institutions remain deeply reticent about

European markets fell sharply at the opening, with the FTSE 100 index in London falling 10 percent, the CAC 40 in Paris fell down more than 9 percent, and the DAX in Frankfurt down 10 percent.

Stock markets in Asia plunged after the rout Wednesday on Wall Street, where the Dow Jones industrial average plummeted 7.3 percent, or 678 points, closing below the 9,000-mark for the first time since 2003.

In Tokyo, already shaken by a nearly 10 percent drop Wednesday, investors dumped shares after Yamato Life Insurance, an unlisted mid-sized insurer, filed for bankruptcy. An unrelated real estate investment trust, New City Residence Investment, also filed for protection from creditors.

The Nikkei 225 stock average slumped 9.6 percent on Friday, closing at 8,276.43. The Japanese benchmark index has given up more than 25 percent of its value so far in October. The Hang Seng index in Hong Kong fell 9.2 percent in late trading, while the ASX/200 index in Sydney closed 8.3 percent lower. In Seoul, the Kospi index fell 4.1 percent. The Shanghai composite index was down 3.6 percent near the close, giving it a loss for the week of 15 percent.

The Indonesian stock exchange suspended trading for a third day.

Asian equities were also hurt by the news that Singapore’s economy 6.3 percent during the third quarter, providing concrete evidence that the financial market contagion has reached the broader regional economy.

Markets will closely watch whether Group of 7 finance ministers meeting at the weekend will announce any added measures to try to stem the financial crisis.

The head of the International Monetary Fund, Dominique Strauss-Kahn, said Thursday that the situation was “serious and even dangerous” and criticized the European Union’s responses to date as “not coordinated enough.”

The IMF raised its estimate of the potential cost of the crisis to around $1.4 trillion, up from a previous forecast of $1 trillion.

Meanwhile, concerns that a global recession could slow demand for oil have caused prices to plunge to less than $84 per barrel on Thursday. OPEC has signaled it may slash output in support of prices at an emergency meeting of leading oil-producing countries in Vienna on November 18.

U.S. crude oil futures for November delivery fell $3.76, more than 4 percent, to $82.83 a barrel in electronic trading on the New York Mercantile Exchange.

The realignment in the currency market continued, with major currencies falling against the yen. The dollar fell to ¥98.93 from ¥99.81 late Thursday in New York, while the euro fell to ¥134.09 from ¥135.80.

The euro fell to $1.3577 from $1.3605, and the British pound fell to $1.6882 of $1.7097. The dollar fell to 1.1198 Swiss francs from 1.1295 francs.

IHT.com