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World shares down on market fears World shares down on market fears
(about 3 hours later)
World shares fell at the start of the week amid growing concerns over the state of the US economy and the possibility of a wider recession.World shares fell at the start of the week amid growing concerns over the state of the US economy and the possibility of a wider recession.
London's FTSE 100, France's Cac 40 and Germany's Dax all shed 1% in early trade after sharp falls in Asia. Germany's Dax index shed 1% in morning trade after sharp falls in Asia while London's FTSE 100, France's Cac 40 also continued their recent downward trend.
China's benchmark index fell 5.6%, Japan's Nikkei fell 3.1%, and Hong Kong's Hang Seng shed 3.5%. China's benchmark index earlier fell 5.6% while Japan's Nikkei fell 3.1%, and Hong Kong's Hang Seng shed 3.5%.
Traders were worried by General Electric's surprise 6% profit fall late last week, ahead of key earnings. General Electric's surprise 6% profit fall late last week worried investors.
Adding to concerns was a US survey that showed US consumer sentiment hit its lowest level in 26 years, which sent the Dow Jones down more than 2% on Friday. Further bad news came out of the US on Monday with Wachovia, the country's fourth-largest bank, reporting a $350m first-quarter loss due to credit problems and seeking a $7bn capital injection.
Adding to concerns was Friday's survey that showed US consumer sentiment hit its lowest level in 26 years, which sent the Dow Jones down more than 2%.
"The fact that [GE] missed expectations really has spooked investors that the reporting season is going to show that the slowdown in the US is impacting corporate profits much more than expected," said Juliette Saly, analyst with ComSec."The fact that [GE] missed expectations really has spooked investors that the reporting season is going to show that the slowdown in the US is impacting corporate profits much more than expected," said Juliette Saly, analyst with ComSec.
We've seen the immediate effect of the credit crisis on financials and there is a second round effect where it hits activities and profit growth in broader corporates Simon Doyle, Schroder Investment ManagementWe've seen the immediate effect of the credit crisis on financials and there is a second round effect where it hits activities and profit growth in broader corporates Simon Doyle, Schroder Investment Management
Philips Electronics shed 3% after seeing profits fall 28% for the first quarter.Philips Electronics shed 3% after seeing profits fall 28% for the first quarter.
Markets are awaiting economic data later on Monday to gauge the state of the world's largest economy.Markets are awaiting economic data later on Monday to gauge the state of the world's largest economy.
Ranjan Singh, a dealer at IG Markets, said Asia was trying to "pre-empt any nasty surprise from the US retail sales" due on Monday.Ranjan Singh, a dealer at IG Markets, said Asia was trying to "pre-empt any nasty surprise from the US retail sales" due on Monday.
'Risks''Risks'
In Europe, the FTSE 100 was down 50 points at 5845.9 while the Dax and Cac indices fell 66.77 points and 41.13 respectively in Frankfurt and Paris. In Europe, the FTSE 100 was down 44.2 points at 5851.3 at lunchtime while the Dax and Cac indices fell 74.9 and 28.91 points respectively in Frankfurt and Paris.
Pessimism over the outlook for the global economy has deepened in the last week with the International Monetary Fund sharply downgrading its forecast for global growth this year.Pessimism over the outlook for the global economy has deepened in the last week with the International Monetary Fund sharply downgrading its forecast for global growth this year.
The World Bank, meanwhile, has warned of the stark threat to developing countries because of the sharp rise in food prices.The World Bank, meanwhile, has warned of the stark threat to developing countries because of the sharp rise in food prices.
Analysts said the credit crunch would inevitably take its toll on the performance of leading companies across the spectrum of industry.Analysts said the credit crunch would inevitably take its toll on the performance of leading companies across the spectrum of industry.
"We've seen the immediate effect of the credit crisis on financials and there is a second round effect where it hits activities and profit growth in broader corporates," said Simon Doyle, head of strategy at Schroder Investment Management in Sydney."We've seen the immediate effect of the credit crisis on financials and there is a second round effect where it hits activities and profit growth in broader corporates," said Simon Doyle, head of strategy at Schroder Investment Management in Sydney.
"For most of this year, we are going to be watching profit growth, or lack thereof. That is the big risk to equity markets now.""For most of this year, we are going to be watching profit growth, or lack thereof. That is the big risk to equity markets now."