U.S. Economy May Be a `Shock' Away From Recession, Lehman Says
By Shamim Adam
Jan. 22 (Bloomberg) -- The U.S. economy may be ``one shock'' away from a recession, Lehman Brothers Inc. said, pointing to the global slump in equity markets as a possible ``tipping point.''
Lehman sees the odds of a recession in the world's largest economy at 40 percent, rising from a ``1-in-3 chance'' at the beginning of the year, Paul Sheard, Lehman's global chief economist, said in a press briefing in Singapore today. A global decline in stocks has wiped more than $5 trillion from equity markets this year on concern world economic growth is faltering.
The odds ``may be edging higher even as we speak,'' Sheard said. ``We see a prolonged period of slow growth. We're not expecting a recovery in 2009.''
Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. are forecasting that the U.S. will slip into recession this year for the first time since 2001 amid fallout from the subprime mortgage crisis. The world's largest banks and securities firms have announced more than $100 billion in debt writedowns and loan losses after the collapse of the U.S. subprime mortgage market.
The MSCI Asia Pacific Index, the regional benchmark, slumped the most since April 1990 today, following Europe into a bear market. The MSCI World Index's 3 percent decline yesterday, the steepest since 2002, left benchmarks in France, Mexico, Italy and 35 other countries at least 20 percent below their highs in the last year.
``Are we seeing a financial shock now developing which, as kind of a self-fulfilling prophecy, could tip the U.S. economy into recession?'' Sheard said. ``It's a little bit too early to pass a verdict on the equity-market meltdown, but we would be looking at market developments.''
Fed Chairman Ben S. Bernanke last week said that banks are trying to protect asset quality and funding, which is tightening credit conditions for the rest of the economy as a result. The U.S. housing market is mired in its worst slump in 16 years.
``We see the housing recession and the credit market dislocation continue to work their way through the economy,'' Sheard said. ``We see them as slow-moving shocks, a series of body blows that keep coming one after another, rather than a knock-out punch.''
this thread is not simple... Good thread...
come and pick some stocks..
wat the best bargain now?
i suppose penny stocks now can dun even consider liao
Asian markets tumble on US worries
By YURI KAGEYAMA, AP Business Writer
TOKYO - Global stock markets extended their shakeout into a second day Tuesday, plunging amid fears that a possible U.S. recession will cause a worldwide economic slowdown.
The dramatic declines in Asia and Europe were expected to spread to Wall Street, where stock index futures were already down sharply hours before the trading day began.
Japan's Nikkei 225 index nose-dived 5.7 percent — its biggest percentage drop in nearly 10 years — to 12,573.05, a day after falling 3.9 percent. Australia's benchmark index sank 7.1 percent, its steepest slide in nearly 20 years. Hong Kong's Hang Seng index, which slumped 5.5 percent Monday, was down 8.2 percent in afternoon trading.
In China, the Shanghai Composite index lost 7.2 percent to close at its lowest level since August.
Indian Finance Minister P. Chidambaram urged investors to remain calm after trading in Mumbai was halted for an hour when the stock market there fell 10 percent within minutes of opening. In volatile afternoon trading, the Sensex was down 6.2 percent.
"There is no reason at all to allow the worries of the Western world to overwhelm us," Chidambaram said.
Investors across the region dumped shares in frenetic trading on worries that the U.S. economy, battered by a credit crisis and housing slump, will shrink in coming months, weakening demand for Asian exports.
Markets have been plunging amid pessimism about the ability of American authorities to prevent a recession. The Federal Reserve has indicated it will lower interest rates further, and President Bush has proposed an economic stimulus package that includes $145 billion in tax cuts, but investors around the world are doubtful that the measures will lift the economy quickly.
"Unless we get some positive 'shock effects,' such as drastic measures from the U.S. government, there is almost no hope for a recovery in stocks," said Koji Takeuchi, senior economist at Mizuho Research Institute in Tokyo.
Oil and gold prices also fell. Light, sweet crude for February delivery fell to $87.72 a barrel on expectations that slower U.S. growth will lead to less demand for crude. Spot gold, which usually benefits from market uncertainty, fell to a two-week low of $855.20 per troy ounce.
U.S. markets were closed Monday for a holiday commemorating civil rights leader Martin Luther King Jr. But Wall Street future prices were down sharply, portending a plunge when trading begins at 9:30 a.m. Eastern time.
Dow Jones industrial average futures were down 621 points, or 5.1 percent, to 11,485, while Standard & Poor's 500 futures were down 70 points, or 5.3 percent, at 1,255.
Noritsugu Hirakawa, who monitors stock trading at Okasan Securities Co. in Tokyo, said investors were spooked by the drastic falls on Chinese and Indian markets — the two emerging economies that are viewed as sustaining global growth even as the U.S. economy sputters.
"The end to the slides in Asian stocks is nowhere in sight," he said. "There is even speculation that China may be exposed to the U.S. subprime mortgage crisis."
In Europe on Monday, investors also dumped stocks, sending the Britain's benchmark FTSE-100 down 5.5 percent and France's CAC-40 Index sliding 6.8 percent. Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.
That sell-off continued Tuesday throughout Asia, with benchmark indices in South Korea, Taiwan, Singapore and the Philippines all falling more than 4 percent. Indonesia's market sank 8.5 percent.
Asian markets have been in a downward spiral for most of January. Since the start of the year, Japan's Nikkei index has tumbled nearly 18 percent, while the Hang Seng is down a stunning 21 percent.
Even the usually upbeat Japanese Economy Minister Hiroko Ota acknowledged that threats were growing.
"We must take the approach of working together with other nations on this," she said on nationally televised news.
FACTBOX: Major stock market crashes
(Writing by Nagesh Narayana; Editing by Paul Bolding)(Reuters) - Stock markets around the world tumbled on Monday.
Here is a list of some major stock market crashes:
* The crash of 1929:
- October 29, 1929 - The Dow Jones Industrial Average fell more than 11 percent on "Black Tuesday", with a record volume of 16 million shares traded. It heralded the beginning of the "Great Depression" of the 1930s. It did not surpass the 1929 average again until 1954.
* The crash of 1987:
- News of a big U.S. monthly trade deficit on October 14 sparked the crash of 1987. The Dow took the first 100-point dive in its history on October 16, 1987 and again on October 19, "Black Monday".
Wall Street lost 508.32 points taking the Dow down to 1,738.4. The crash wiped 22.6 percent off the value of the New York Stock Exchange, compared with 12.8 percent on the worst day of the 1929 Wall Street Crash.
* The crash of 1997:
- Financial turmoil in Asia that began in July when international currency speculators bet against the Thai baht helped trigger the biggest single-day point decline in the Dow Jones industrial average on Monday, October 27, 1997.
- Stock markets in Argentina, Mexico, and Brazil dropped between 13 and 15 percent. It spilled over into European markets on October 28. Tokyo's Nikkei 225 index fell 725.67 points or 4.26 percent to 16,312.69. Singapore's Straits Times Index ended 122.87 or 7.59 percent lower to 1,497.03.
* The crash of 2001:
- Another global stock crash was triggered by the 9/11 attack on the United States. Investors across the world snapped up traditional safe assets like gold and bonds after the attack pummeled global stocks, shook the U.S. dollar and drove up oil prices.
- Main U.S. markets were closed after the attacks, which occurred just as the trading day was about to begin. After a delayed opening, Tokyo stocks slid to 17-year lows, with the Nikkei stock average losing 6.23 percent to 9,651.62 and breaching 10,000 for the first time since August 1984.
- European stock indices fell to their lowest levels since December 1998. London's FTSE 100 index shed 5.7 percent in its biggest one-day fall since the crash of October 1987, wiping $98 billion off the value of shares.
* The crash of 2007:
- On February 27, the Dow index fell 3.3 percent, or 416 points, following a collapse in Chinese stocks and weak U.S. manufacturing data. The Nikkei share average lost more than 3 percent and the FTSE 100 was down 116.1 points, or 1.85 percent. Mexican stocks lost 4 percent and Chinese stocks plunged nearly 9 percent, erasing about $140 billion of value in their biggest fall for a decade.
Today STI and stocks kenna short big time, last hour regained all it's losses. The degree of fall is somewhat too extreme, maybe there will be some kind of rebound before it heads down south again.
I read that in 1929 stock crash, the ones who were hurt most were not those who already had shares.
There were other people who went into the market after the initial small crash, thinking they could buy tonnes of cheap stocks and then the prices would increase soon after, making them instant billionaires.
Then the prices continued to crash down through the floor and these people were wiped out.
wa i think today rebounce a lot leowz
WASHINGTON : The US Federal Reserve slashed its key federal funds short-term interest rate by three quarters of a percentage point to 3.50 percent on Tuesday amid sharp falls on global stock markets.
On the Fed news, London's FTSE 100 index of leading shares rallied to stand 1.6 percent higher but within half an hour, stocks fell back to show a fall of almost half a percent.
It was a similar story on other European markets, which all moved sharply into positive territory on the Fed action but then fell back as investors waited for the New York opening.
Dealers said that after further heavy losses on Asian bourses on Tuesday, taking up from where they left off Monday, European investors sold off sharply in early trade, anticipating a bad day on Wall Street.
A public holiday meant that the US markets were spared the rout which hit Asia and Europe Monday but indications were that New York would come under pressure on Tuesday until the Fed dramatically intervened.
"In the end the Fed simply couldn't wait another week until it's next scheduled (rate) meeting," said Capital Economics analyst Paul Ashworth.
"It chose to act, cutting the fed funds rate by an almost unprecedented 75 basis points to 3.5 percent ... in an attempt to shore up confidence before US stock markets open."
The dollar dived immediately following the Fed's action, while oil and gold prices recovered slightly.
Stock market turmoil swept around the world again on Tuesday, with Asian shares pummelled by fears of a US recession. World leaders urged calm and dismissed fears of a recession.
"There is no reason to believe there will be a recession in Europe or in Germany," German Chancellor Angela Merkel told NDR-Info radio.
After what one British newspaper called "Manic Monday," European shares rode a roller-coaster as sharp losses at the open gave way to modest rises in London and Paris, amid talk of coordinated interest rate cuts by global central banks, dealers said.
Asian equities slumped earlier, with Japanese share prices hitting a 28-month low and Hong Kong closing down almost nine percent. Traders were nervously waiting for Wall Street to reopen after a long holiday weekend.
At about 1400 GMT the London FTSE 100 index was down 0.43 percent at 5,554.00 points. The Paris CAC 40 showed a loss of 1.21 percent at 4,687.07 points and in Frankfurt the DAX was down 0.56 percent at 6,751.88.
European exchanges on Monday suffered their biggest one-day falls since September 11, 2001 attacks on the United States.
Owing to the Wall Street holiday, dealers initially said they had no fresh lead to halt the global rout set off by disappointment in President George W. Bush's economic stimulus package unveiled on Friday.
Dealers said Bush's announcement last Friday of 140 billion dollars (97 billion euros) in temporary tax cuts and other measures to ward off a recession in the world's biggest economy was not good enough.
Trading was briefly suspended in South Korea and India on Tuesday.
China's main index shed 7.22 percent, Sydney plunged 7.1 percent, and Indian share prices closed down 4.97 percent. - AFP/ms/de
Singapore shares up 3.96% on US rate cut
Posted: 23 January 2008 0956 hrs
SINGAPORE - Singapore shares were higher in early morning trade Wednesday, reversing two straight sessions of losses after the US Federal Reserve unexpectedly cut its key interest rate.
The main Straits Times Index (STI) rose 3.96 percent or 113.47 points to 2,980.02 at 9:44am local time. The STI fell 1.73 percent Tuesday, mirroring losses in other Asian markets as investors looked for an exit on mounting concerns of a possible US recession before the surprise rate cut overnight by the Federal Reserve.
Analysts said the Federal Reserve's bold move to cut its key interest rate by three-quarters of a percentage point to 3.5 percent was seen as a sign of the central bank's resolve to shore up the jittery US economy and investor confidence.
"The Fed's move was clearly to stem the panic in financial markets," Standard Chartered Bank said in a note to clients.
"By cutting rates so close to the January 30 meeting, the Fed was primarily trying to stem the sharp falls in financial markets and prevent confidence -- consumer and business -- from falling sharply, with further knock-on effects to the real economy." - AFP/ir
Asian stocks lifted by US rate cuts
Posted: 23 January 2008 0905 hrs
SINGAPORE: Asian stocks bounced back on Wednesday after the US Federal Reserve cut interest rates in an emergency move to calm investor nerves about a deteriorating US economy and stop a global rout on the markets.
Singapore's key Straits Times Index opened 4.02 percent or 115.31 points higher at 2,981.86, reversing two straight sessions of losses amid a global sell-off on fears a US recession would hit the rest of the world.
Japan's benchmark Nikkei-225 index rose 3.7 percent or 470.18 points to 13,043.23 in early trade. The broader TOPIX index of all first-section shares was up 44.04 points or 3.6 percent to 1,264.58. On Tuesday, Tokyo share prices tumbled 5.65 percent to a 28-month low.
South Korea's KOSPI index surged 45.5 points, or 2.83 percent, to 1,654.52 in the first 15 minutes of trading on Wednesday.
Australian and New Zealand shares also rose. Australian shares opened 318.7 points or 6.1 percent higher at 5,505.5, after suffering its worst one-day percentage drop since October 1989 on Tuesday. New Zealand's NZX-50 was up 0.8 percent at 3,632.61, and appears set to break 14 straight days of losses.
But traders ruled out a strong recovery in global markets, noting that Wall Street did not end in positive territory despite the better sentiment after the US rate cuts.
US stocks skidded but averted a meltdown on Tuesday. The Dow Jones Industrial Average slid below 12,000 points for the first time since November 2006 but rebounded from its worst levels, ending with a loss of 128.11 points (1.06 percent) at 11,971.19.
Before the opening of Wall Street trading on Tuesday, the Fed cut its benchmark federal funds rate - the rate banks charge each other for overnight loans - by 0.75 percentage points to 3.50 percent. It also cut its discount rate by the same 75 basis points to 4 percent. The discount rate is the rate the Fed charges to member banks for short-term loans. - CNA/ir
like i said it will not be much upside.. in fact a steep rate cut is a indication of very bad economy to come.
75 basis points at one go.. i mean do u feel they are very desperate and worried about something ???
Last edited by raincool2005; 23rd January 2008 at 10:25 AM.
And this drop will cause the greenback to weaken.
Month end expected to have another cut another 25-50 points!
Last edited by melvin; 23rd January 2008 at 11:12 AM.
Stephen Roach, head of Asia for U.S. investment bank Morgan Stanley (MS.N: Quote, Profile, Research), said the Fed may have let itself be goaded into action by a market panic.
"We have a market-friendly Fed possibly injecting a lot of liquidity in the system which will set us up for another bubble economy," Roach told Reuters.
"I'm sort of worried that all they did yesterday was to hit the snooze button," he said. "(This is) excessive monetary accommodation that just takes us from bubble to bubble to bubble."
Last edited by raincool2005; 23rd January 2008 at 05:20 PM.
It will go up again few days later right?