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World markets jittery on US woes World markets jittery on US woes
(about 1 hour later)
Global share prices continued their volatile trading, after US stock indexes fell overnight amid fears for the US economy and a fragile dollar. Global share prices have continued their recent volatility on Thursday, as fears remain over the US economy and the weakness of the dollar.
The UK's FTSE 100 index fell in early trading, before rebounding and climbing 27 points, or 0.4%, to 6,097.90. The UK's FTSE 100 index fell in early trading, before rebounding to climb 57 points to 6,128 by mid-afternoon.
Earlier on Wall Street, the Dow Jones index slumped by more than 200 points prompting nervous trading in Asia, and a slide in Germany and France. Germany's Dax and Paris' Cac were also up, but the main Australian and Hong Kong indexes had earlier ended down.
Analysts said that markets probably would be jittery in coming months. The volatility follows sharp falls in US stocks on Wednesday. US markets are closed for Thanksgiving on Thursday.
US markets are closed for Thanksgiving on Thursday. Analysts said that markets probably would be jittery for several months.
Rate cut?Rate cut?
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.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.
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 ManagementWe 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. Market expectations of a further US rate cut were buttressed on Tuesday by a statement from the Federal Reserve which lowered its growth forecast for next year, underpinning the fears of a slowdown.
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. The US central bank now sees the economy growing by between 1.8% and 2.5% in 2008, compared with its previous forecast of between 2.5% to 2.75%.
The outlook for the dollar remains weak given expectations 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.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. The dollar touched a record low of $1.4873 against the euro 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."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."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 jitters Financial concerns
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.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."
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.
As worries over the economy continued, investors turned to the safety of government securities.
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.