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World markets jittery on US woes World markets jittery on US woes
(about 2 hours later)
Asian share prices remained jittery on Thursday, following a plunge in US stocks overnight, amid continued fears for the US economy. Global share prices remained under pressure on Thursday, after US stock indexes fell overnight amid fears for the US economy and a fragile dollar.
The Nikkei ended up 0.3% at 14,888.77 points - having earlier touched a 16-month low - as the yen weakened slightly against the dollar. The UK's FTSE 100 index was down 0.6% at 6,032.9 points, with Germany's Dax falling 0.4% to 7,489.87, and France's Cac sliding 0.2% to 5,369.32.
On Wall Street the Dow Jones index slumped by more than 200 points. Earlier on Wall Street, the Dow Jones index slumped by more than 200 points prompting nervous trading in Asia.
There will be no fresh direction from Wall Street on Thursday, with all US markets closed for Thanksgiving. Analysts said that markets probably would be jittery in coming months.
The falls came a day after the US Federal Reserve cut its growth forecast - stoking fears of a slowdown. US markets are closed for Thanksgiving on Thursday.
The central bank now sees the US economy growing by between 1.8% and 2.5% in 2008, compared to its previous forecast of between 2.5% to 2.75%. Rate cut?
The dollar, weakened by the changed growth forecast, ticked slightly higher on Thursday, with one dollar now buying 108.855 yen. The worry for many investors is that problems in the US housing market, coupled with higher interest rates and a global credit crunch, will spread to the wider economy, slowing annual growth.
"I think there is a brief relief among investors," said Yoshinori Nagano, chief strategist at Daiwa Asset Management. Market expectations of a further rate cut were buttressed by a Tuesday statement from the Federal Reserve which lowered its growth forecast for next year, underpinning the fears of a slowdown.
The US central bank now sees the economy growing by between 1.8% and 2.5% in 2008, compared to its previous forecast of between 2.5% to 2.75%.
We just can't seem to break free of the financial concerns that are out there Bucky Hellwig, Morgan Asset Management
The changed forecast sent shares lower around the world, with Japan's Nikkei index closing up 0.3% at 14,888.77 points - having earlier touched a 16-month low - as the yen weakened slightly against the dollar.
At the same time, the outlook for the US currency remains weak amid speculation that US interest rates will have to fall to stimulate growth.
Cutting interest rates tends to weaken a currency as investors shift their money to countries and regions where they can get a higher rate of return.
The dollar touched a record low of $1.4873 against the dollar on Thursday, and also fell against the Japanese yen.
"We are looking for continued dollar weakness and would not be surprised to see the euro break $1.50 within weeks rather than months," said Teis Knuthsen, head of currency research at Danske markets in Copenhagen.
"Primarily, it is still the relative economic development between the US versus the rest of the world, combined with the ongoing financial crisis, which is heavily concentrated in the US," he added.
Financial jittersFinancial jitters
In the US the worries saw the Dow Jones index plummeting 211.1 points or 1.6% to 12,799.0 while the Nasdaq fell 1.3% or 34.7 points to 2,562.2. In the US on Wednesday, the worries saw the Dow Jones index drop 211.1 points, or 1.6%, to 12,799, while the Nasdaq fell 1.3%, or 34.7, to 2,562.2.
"We just can't seem to break free of the financial concerns that are out there," said Bucky Hellwig, of Alabama-based Morgan Asset Management "We just can't seem to break free of the financial concerns that are out there," said Bucky Hellwig, of Alabama-based Morgan Asset Management.
"The unwinding of the real estate and the mortgage market continues to weigh on investor concerns.""The unwinding of the real estate and the mortgage market continues to weigh on investor concerns."
Falling share prices boosted demand for government bonds, seen as a safe haven in troubled times.
Dollar pressure
The continuing dollar and share weakness has been sparked by the US mortgage debt crisis, which has led to a growing number of American banks revealing multi-million dollar losses.The continuing dollar and share weakness has been sparked by the US mortgage debt crisis, which has led to a growing number of American banks revealing multi-million dollar losses.
US Treasury Secretary Henry Paulson told the Wall Street Journal that the number of potential home loan defaults "will be significantly bigger" in 2008 than in 2007. As worries over the economy continued, investors turned to the safety of government securities.
Some analysts now expect the Federal Reserve to cut US interest rates further when it meets in December in an effort to ease problems in both the housing and credit markets. Yields on Japanese 10-year bonds fell to their lowest rate in two years. Earlier, the yield on the US Treasury's 10-year note fell below 4% for the first time since 2005.
As worries over the economy continued, investors turned to the safety of government securities, pushing the yield on the Treasury's 10-year note below 4% for the first time since 2005.