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US shares up in volatile trading US shares up in volatile trading
(about 2 hours later)
Wall Street shares ended higher after sharp falls and gains in a day of tense trading, with the Dow closing up 4.6%.Wall Street shares ended higher after sharp falls and gains in a day of tense trading, with the Dow closing up 4.6%.
Yahoo shares jumped on talk of deal with Microsoft and pushed the Nasdaq index up 5.4%. Yahoo shares jumped on talk of a deal with Microsoft and pushed the Nasdaq index up 5.4%.
Investors were digesting September's industrial production figures - which made their biggest drop since 1974 - while inflation was unchanged.Investors were digesting September's industrial production figures - which made their biggest drop since 1974 - while inflation was unchanged.
In Europe, London's FTSE 100 closed down 5.7%, France's Cac 40 fell 5.9% and Germany's Dax lost 4.9%.In Europe, London's FTSE 100 closed down 5.7%, France's Cac 40 fell 5.9% and Germany's Dax lost 4.9%.
The Dow closed at 8,973, while the technology-based Nasdaq index ended the day at 1,717. The Dow Jones Industrial Average closed at 8,979 after a late rally, while the technology-based Nasdaq index ended the day at 1,717.
On Wednesday, the Dow Jones recorded its biggest one-day percentage fall since October 1987, closing almost 8% down. Wall Street is expected to remain extremely volatile, as it has been since last month, because of investors' great anxiety about the economy.
"We're going to continue to see volatility. You're not going to see 50-point ranges, you're going to see two-three-four hundred point ranges," said Woody Dorsey, of the financial forecasters Market Semiotics.
Production falls
Tom Higgins of Payden & Rygel investment managers said some investors were being forced to use the stock market because other markets remained largely paralysed.
"If you have to liquefy your assets and you need access to cash immediately then the market you're going to do it in is the equity market and that's what I think is pushing around the indexes," he said.
On Wednesday, the Dow recorded its biggest one-day percentage fall since October 1987, closing almost 8% down.
DOW JONES INDUSTRIAL AVERAGE: 16 October 2008*All Times GMTDOW JONES INDUSTRIAL AVERAGE: 16 October 2008*All Times GMT
Other developments included:
  • US industrial production fell 2.8% in September, figures showed
  • US consumer price inflation was unchanged in September from August
  • The Philadelphia Federal Reserve's report showed manufacturing conditions had weakened in October
  • In Tokyo, the Nikkei 225 index fell more than 1,000 points, closing down 11.4% at 8,458.45
  • Hong Kong's Hang Seng fell 7.6% to 14,785.60 points
  • Australia's main share index fell 6.7% while India's was down 4%
  • Oil prices fell after weekly US fuel reserves figures rose more than expected; US light, sweet crude for November delivery hit a 14-month low of $69.93 a barrel
  • Germany lowered its forecast for economic growth next year from 1.2% to 0.2%
Other developments included:
  • US industrial production fell 2.8% in September, figures showed
  • US consumer price inflation was unchanged in September from August
  • The Philadelphia Federal Reserve's report showed manufacturing conditions had weakened in October
  • Oil prices fell after weekly US fuel reserves figures rose more than expected; US light, sweet crude for November delivery hit a 14-month low of $69.93 a barrel
  • Germany lowered its forecast for economic growth next year from 1.2% to 0.2%
FTSE 100 INDEX: 16 October 2008*All Times GMTFTSE 100 INDEX: 16 October 2008*All Times GMT
The US inflation figures were better than had been expected, despite the low interest rate policy being pursued by the central bank, the Federal Reserve.The US inflation figures were better than had been expected, despite the low interest rate policy being pursued by the central bank, the Federal Reserve.
Hurricanes in the Gulf of Mexico and a strike at Boeing were partly blamed for the big fall in industrial production, which hit sentiment.Hurricanes in the Gulf of Mexico and a strike at Boeing were partly blamed for the big fall in industrial production, which hit sentiment.
"It is one for the record books, or just about," said Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ in New York."It is one for the record books, or just about," said Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ in New York.
"It is a sign that the economy is falling away quickly, and it is certainly consistent with the recession that we seem to be in.""It is a sign that the economy is falling away quickly, and it is certainly consistent with the recession that we seem to be in."
Protracted slowdownProtracted slowdown
Shares rose earlier in the week on optimism after more details emerged about the bank rescue packages being proposed by the UK and the European Union.Shares rose earlier in the week on optimism after more details emerged about the bank rescue packages being proposed by the UK and the European Union.
What we're witnessing is the limits of what these banking bail-outs can achieve in the face of what increasingly looks like the onset of a global economic recession Robert Peston, BBC business editor Read Peston's PicksWhy are markets falling again?What we're witnessing is the limits of what these banking bail-outs can achieve in the face of what increasingly looks like the onset of a global economic recession Robert Peston, BBC business editor Read Peston's PicksWhy are markets falling again?
But worries about how a protracted economic slowdown would affect the rest of the economy are now coming to the fore.But worries about how a protracted economic slowdown would affect the rest of the economy are now coming to the fore.
"Sentiment is deteriorating very fast," said Jacky Choi, a fund manager at Value Partners."Sentiment is deteriorating very fast," said Jacky Choi, a fund manager at Value Partners.
"People are losing what little confidence they have on a day-by-day basis.""People are losing what little confidence they have on a day-by-day basis."
InsufficientInsufficient
Sentiment was not helped by suggestions from the Japanese prime minister that the $700bn (£406bn) US bank bail-out package was not enough.
"Since it was insufficient, the market is again falling sharply," Taro Aso said.
There were also signs that the cash injections from central banks had not yet restored confidence in the banking sector.There were also signs that the cash injections from central banks had not yet restored confidence in the banking sector.
BBC business editor Robert Peston said that banks were still not lending to each other at anything like a normal rate of interest relative to official rates.BBC business editor Robert Peston said that banks were still not lending to each other at anything like a normal rate of interest relative to official rates.
Gordon Brown says people need to know financial institutions are acting responsiblyGordon Brown says people need to know financial institutions are acting responsibly
This was worrying as it meant banks were unlikely to lend money at better rates to consumers and businesses, he added.This was worrying as it meant banks were unlikely to lend money at better rates to consumers and businesses, he added.
Many groups are trying to find solutions. Eight mutual European banks led by Credit Agricole have struck a deal to resume lending to each other, according to AFP news agency.Many groups are trying to find solutions. Eight mutual European banks led by Credit Agricole have struck a deal to resume lending to each other, according to AFP news agency.
In another attempt to help banks, the Bank of England has changed the ways it is prepared to lend to them.In another attempt to help banks, the Bank of England has changed the ways it is prepared to lend to them.
The idea will be to allow banks to borrow overnight without any stigma as well as offering loans for up to 30 days with assets such as mortgages acceptable as collateral.The idea will be to allow banks to borrow overnight without any stigma as well as offering loans for up to 30 days with assets such as mortgages acceptable as collateral.