Europe's Markets Slip After Asian Fall
The New York Times
Published: Jan 16, 2009
PARIS — Global stocks maintained their downward trajectory Thursday with European stocks slipping in the wake of sharp declines in Asia.
In the first two weeks of 2009, the U.S. benchmark Dow Jones industrial average has given up 6.6 percent of its value, while the broad European market, as represented by the Dow Jones Euro Stoxx 600 index, is down 5.8 percent. The Nikkei 225 stock average in Tokyo is down 9.4 percent over the same period.
Market participants were focused on the European Central Bank, which was meeting Thursday afternoon in Frankfurt. The bank was expected to cut the main interest rate target from the current 2.5 percent, but the size of the reduction was uncertain, according to a Reuters poll of economists.
Still, tame inflation data from Germany could give the central bank the confidence to cut rates without worrying too much about inflation. The Federal Statistical Office said Thursday in Wiesbaden that inflation in Germany, the euro zone’s largest economy, fell to 1.1 percent in December from 1.4 percent in November.
In early European trading, the Dow Jones Euro Stoxx 50 index, a barometer of euro zone blue chips, ticked down 0.3 percent and the FTSE 100 index in London also fell 0.3 percent. The CAC 40 in Paris was down 0.2 percent, and the DAX in Frankfurt declined 0.4 percent.
Trading in U.S. index futures suggested Wall Street stocks would open slightly lower. On Wednesday, the Standard & Poor’s 500 index fell 3.4 percent.
U.S. crude oil futures for February delivery fell 80 cents to $36.40 a barrel.
The dollar was mixed against other major currencies. The euro slipped to $1.3177 from $1.3191 late Wednesday in New York, while the British pound rose to $1.4627 from $1.4612 The dollar rose to 89.13 yen from 89.04 and to 1.1175 Swiss francs from 1.1159. The euro has been losing ground against the dollar since mid-December, as investors anticipate more ECB interest rate cuts and slowing growth on the Continent.
The Federal Reserve in Washington and the Bank of Japan have both moved their main rate targets to near zero. The Bank of England, the British central bank, cut its benchmark rate last week to 1.5 percent, the lowest in its history.
A sharp fall in machinery orders in Japan on Thursday provided the latest grim indication that the country’s economic contraction is set to be deep and prolonged as exports to other recession-struck regions of the world — notably the United States and Europe — plunge.
The data, and disappointing December retail sales reported in the United States late Wednesday, helped reignite global economic worries and sent Asian stock markets sharply lower on Thursday.
The Nikkei 225 index in Tokyo shed 4.9 percent. By midafternoon the Hang Seng in Hong Kong was down 5 percent the benchmark Kospi in South Korea 6 percent. The key indexes in Singapore and Taiwan were 3.2 and 4.4 percent lower.
“We’re seeing a very painful rebalancing of an unbalanced world and it’s only just begun,” said Stephen Roach, chairman of Morgan Stanley Asia, adding that export-dependent Asia was facing a “monster external demand shock.”
“Don’t count on a V-shaped recovery,” Mr. Roach said. “To get that, you need a spark in the demand side and the consumer in the United States is not in the mood to give a spark.” The economic data from Japan added to a picture of an economy that is decelerating more rapidly than analysts had expected in the wake of the credit crunch that has severely dented global demand by companies and consumers.
Core machinery orders fell a record 16.2 percent in November — twice as much as economists had expected — indicating that Japan’s economic recession is set to worsen in 2009.
The sharp across-the-board drop in global demand has forced Japanese companies to cut back production and staff, and fueled expectations that some of Japan’s export giants, like Sony and Toshiba, may have losses for the financial year ending March for the first time in years.
Japan trade data out next week, and retail and trade figures from Singapore Thursday and Friday, are likely to cement this picture of worsening gloom in the Asia-Pacific region.
Export figures from earlier this week showed that China’s once-booming export machine, too, is grinding to a halt, making more production cutbacks and layoffs likely.
David Jolly reported from Paris and Bettina Wassener from Hong Kong.
© The New York Times. All rights reserved. This article originally appeared in The New York Times.
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