LONDON, 2 March 2007 — Turbulent world stock markets fell again yesterday as another wave of anxiety spread from Asia to Europe and led to further losses in the United States.
Wall Street dived at the open before recovering slightly. In Europe markets gained early in the day, plunged in the afternoon but were off lows at the close of trading.
In Asia, the aftershocks from a stock market plunge on Tuesday reverberated around the region, pushing Tokyo and Shanghai back into negative territory.
“There continues to be a lot of nervousness around the stock market,” Barclays Stockbrokers analyst Henk Potts said in London.
“There’s a big debate going on about how quickly the US economy is slowing down,” he said, adding that investors remained worried about the stock market slump in Asia.
US-based Briefing.com market analyst Dick Green added: “Right now, everything and anything is viewed in a negative light.”
“It will take awhile for the fears to calm down. Talk will center on unwinding of hedge fund positions, currency moves, and sub-prime mortgage delinquencies,” Green said, referring in part to worries about the vast US mortgage market.
Other market participants said a stronger Japanese yen had also spooked some investors. Al Goldman, a chief market strategist at AG Edwards, said the yen’s gains had raised “concerns that this could lead to an unwinding of ‘carry trade’ positions favored by large hedge funds, and stir up liquidity worries.” He was referring to a practice in which traders borrow yen, due to Japan’s low interest rates, to purchase other currencies yielding better returns. Some analysts say that this could now be abating as buyers seek needed cash to bolster their portfolios.
A fresh report on US consumer spending and incomes did not appear to boost confidence, but a report on industrial activity did help the Dow recover somewhat, traders said.
In midday trading on Wall Street, the Dow Jones Industrial Average was down 0.17 percent at 12,247.96, while the tech-laden Nasdaq composite was down 0.25 percent at 2,410.14.
The broad-market Standard and Poor’s 500 index lost 0.11 percent to 1,405.25.
At the close in Europe, the London FTSE 100 showed a loss of 0.90 percent to 6,116 points, while in Paris the CAC 40 fell 1.05 percent to 5,458.40 points and in Frankfurt the Dax shed 1.12 percent to 6,640.24 points.
Asian investors had been in a state of high tension yesterday amid lingering fears that Tuesday’s sell-off signaled the start of a major downward correction.
“Investors are still wondering if the storm is actually over or not,” said Masatoshi Sato, a senior strategist at Mizuho Investors Securities in Tokyo.
“Aftershocks in some markets, where prices are overvalued, may be seen from now on. Volatile and sensitive trading is likely to continue at least until mid-March,” he said.