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10.09.08

Jangling Nerves on Wall Street

America woke to a devastated financial landscape around the world, as Asian and European markets followed Wall Street’s record plunge.

America has woken up to survey a devastated financial landscape around the world as the Asian and European markets followed Wall Street’s record plunge Thursday. A hurriedly arranged broadcast on the financial crisis by George W. Bush to be made Friday held out little hope of being able to stem the market mayhem.

There was little respite in sight. The Dow Futures were trading 200 points below the closing price, suggesting traders were expecting the market to continue its slide Friday. The market may be boosted briefly by news from the real economy, where IBM is expected to post profits.

"Right now the market is just panicked," said the Standard & Poor's chief economist. "Everybody just wants to get their money and put it under the mattress."

But there was also a hint that the bottom of the stock market may be in sight. "I think the base driver today is that we're oversold," Arthur Hogan, chief market analyst at Jefferies & Co, told Associated Press. "You can't do that too long before things turn around, and I think the bottom of this market gets put in this week."

The overnight news from markets whose day starts before ours, however, was frightening. In Australia, the S&P index fell a record 8.3 percent in what is being dubbed “Black Friday.” The Nikkei index in Japan slumped 9.6 percent, down to its lowest level since May 2003.

Panic also gripped the markets elsewhere. The indexes in Hong Kong, India, Singapore, and the Philippines were all down about 8 percent. The stock market was closed in Indonesia in a vain effort to defy the falling prices and was kept closed all day.

"Investors were gripped by fear," Yutaka Miura, senior strategist at Shinko Securities in Tokyo, told Associated Press.

As the world turned, the panic spread to Europe, where markets opened and instantly fell. By mid-morning in London, the FTSE index was down 5.4 percent. Soon after trading began in Vienna, the stock exchange was suspended after stocks instantly fell 10 percent.

The rest of the world was following Wall Street’s lead. The Dow has plunged 20.9 percent in the last seven days, the worst week of trading since October 1987. A final hour sell-off on Wall Street Thursday saw stocks dip more than 7 percent, representing a loss of $872 billion.

"Right now the market is just panicked," David Wyss, chief economist at Standard & Poor's in New York, told Associated Press. "Nobody wants to take on any risk. Everybody just wants to get their money and put it under the mattress."

Traders appear to doubt that the massive financial intervention into the banking and insurance sectors by governments on both sides of the Atlantic will stem the slide.

Some small hope was being pinned on a crisis meeting of the G7 finance ministers and central bankers Friday in Washington, though there is no clear suggestion of what they might do to prevent the relentless fall in stock prices worldwide.

Everything suggests we are in historic territory. There has been a free fall of shares in America for the last month, with the Dow down 2,338 points, or 21 percent, in the last four weeks. The decline in the Dow Thursday was the third-worst fall in the index’s history; the worst fall being less than two weeks ago.

Meanwhile, as investors switch out of the stock market and into gold, the oil prices has fallen to a one-year low, with the price of US crude oil now below $83 a barrel.