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Recession fears weigh on markets Markets bounce after US rate cut
(20 minutes later)
The main European and Asian share indexes have fallen sharply amid fears that a US recession will lead to a global economic slowdown. European share indexes have recovered after the US central bank cut its key interest rate from 4.25% to 3.5%.
London's FTSE 100 index has had a bumpy day, dropping more than 3% at the open. It has since recovered and was recently trading between 1% higher and 1% lower. London's FTSE 100 index, which had been trading between 1% higher and 1% lower all day, rose 1.5% to 5662.0.
The Dax in Frankfurt remained down 2.0% while the Cac 40 in Paris recovered some lost ground to trade 0.25% lower.
Before the surprise rate cut, US index futures had suggested that New York share markets were likely to fall by as much as 5%.
Earlier, Asian markets had tumbled with Japan's Nikkei index closing down 5.7%, taking its decline this year to 18%.Earlier, Asian markets had tumbled with Japan's Nikkei index closing down 5.7%, taking its decline this year to 18%.
Many analysts are predicting indexes will remain volatile in coming weeks.Many analysts are predicting indexes will remain volatile in coming weeks.
"I think we can safely say that the stomping, snorting optimistic beast of a market is fleeing the field, to be replaced by something scary and grizzly," said BBC Business Editor Robert Peston."I think we can safely say that the stomping, snorting optimistic beast of a market is fleeing the field, to be replaced by something scary and grizzly," said BBC Business Editor Robert Peston.
HAVE YOUR SAY Markets will recover again as they always do. In the meantime we have to tighten our belts! Richard, London Send us your commentsHAVE YOUR SAY Markets will recover again as they always do. In the meantime we have to tighten our belts! Richard, London Send us your comments
"But volatility is the order of the day. In London, there has been a stunning bounce, which could yet turn out to be ephemeral."But volatility is the order of the day. In London, there has been a stunning bounce, which could yet turn out to be ephemeral.
"Having worked at assorted times on trading floors, I can smell the adrenalin, testosterone and fear that is creating this mayhem," he said."Having worked at assorted times on trading floors, I can smell the adrenalin, testosterone and fear that is creating this mayhem," he said.
US direction
Analysts said that a lot will now depend on how the US market performs when it opens later on Tuesday.
The New York Stock Exchange was closed on Monday for a public holiday, and index futures suggest that shares could be set for their biggest falls since the attacks of 11 September 2001 when trading starts.
However, some key US firms, including computer maker Apple, are due to report earnings figures. Investors will be watching these announcements closely for further signs of problems in the economy, analysts said.
In Frankfurt, the Dax index was down 2%, while the Cac 40 in Paris slid 1.3%.
MARKETS VIDEO ROUND-UP Scene in Tokyo Shanghai's figures How Mumbai fared Singapore's markets Bear market may be looming
The recent falls were triggered by fears of a global recession, after growing concern that a proposed US stimulus package, which would involve about $145bn (£76bn) in tax cuts to encourage spending, might not be enough.The recent falls were triggered by fears of a global recession, after growing concern that a proposed US stimulus package, which would involve about $145bn (£76bn) in tax cuts to encourage spending, might not be enough.
Dominique Strauss-Kahn, the head of the International Monetary Fund, said the global economic situation was "serious" and that all countries in the world were suffering in the wake of a slowdown in US growth.Dominique Strauss-Kahn, the head of the International Monetary Fund, said the global economic situation was "serious" and that all countries in the world were suffering in the wake of a slowdown in US growth.
British Prime Minister Gordon Brown said the UK was well-placed to weather the storm.British Prime Minister Gordon Brown said the UK was well-placed to weather the storm.
MARKETS VIDEO ROUND-UP Scene in Tokyo Shanghai's figures How Mumbai fared Singapore's markets Bear market may be looming
He promised that the government would do "everything in its power to maintain economic stability".He promised that the government would do "everything in its power to maintain economic stability".
FTSE 100 - BIGGEST FALLS 20/10/87 down 12.2%19/10/87 down 10.8%26/10/87 down 6.2%11/09/01 down 5.7%22/10/87 down 5.7%22/01/08 down 5.5%
The drop in stock markets has also been having an effect on other assets.The drop in stock markets has also been having an effect on other assets.
Government bond prices have risen, as many investors look for assets which guarantee safer returns.Government bond prices have risen, as many investors look for assets which guarantee safer returns.
At the same time, crude oil and metals prices have fallen because of expectations that slower global economic growth will hurt demand.At the same time, crude oil and metals prices have fallen because of expectations that slower global economic growth will hurt demand.
'Remain calm''Remain calm'
In Mumbai on Tuesday, India's main stock index, the Sensex, fell 9.8% within minutes, triggering an automatic one-hour halt in trading.In Mumbai on Tuesday, India's main stock index, the Sensex, fell 9.8% within minutes, triggering an automatic one-hour halt in trading.
FTSE 100 - BIGGEST FALLS 20/10/87 down 12.2%19/10/87 down 10.8%26/10/87 down 6.2%11/09/01 down 5.7%22/10/87 down 5.7%22/01/08 down 5.5%
Later, it recovered some of its losses, to close 5.0% lower following its 7.4% fall on Monday, which was the Sensex's worst day.Later, it recovered some of its losses, to close 5.0% lower following its 7.4% fall on Monday, which was the Sensex's worst day.
India's Finance Minister P Chidambaram has urged Indian investors to "remain calm" and advised them to "stay invested".India's Finance Minister P Chidambaram has urged Indian investors to "remain calm" and advised them to "stay invested".
It basically stems from the United States Hiroko OtaJapanese minister for economic and fiscal policy Q&A: Stock market fallsIndian investors despair
Mr Chidambaram said that "enough liquidity will be provided to the brokers to tide over the present crisis".Mr Chidambaram said that "enough liquidity will be provided to the brokers to tide over the present crisis".
In China, the main Shanghai Composite Index closed down 7.2% at a five-month low, having lost 17% in the past six days of trading.In China, the main Shanghai Composite Index closed down 7.2% at a five-month low, having lost 17% in the past six days of trading.
Trading was also suspended briefly in South Korea, where the market eventually closed down 4.4%, while Hong Kong's Hang Seng index suffered its biggest daily fall, closing down 8.7%.Trading was also suspended briefly in South Korea, where the market eventually closed down 4.4%, while Hong Kong's Hang Seng index suffered its biggest daily fall, closing down 8.7%.
Global co-operationGlobal co-operation
Sydney's market continued its longest losing streak for 26 years, closing 7.1% lower.Sydney's market continued its longest losing streak for 26 years, closing 7.1% lower.
It basically stems from the United States Hiroko OtaJapanese minister for economic and fiscal policy Q&A: Stock market fallsIndian investors despair
The Japanese government said it saw no reason to intervene to support the markets and a Bank of Japan meeting left interest rates unchanged.The Japanese government said it saw no reason to intervene to support the markets and a Bank of Japan meeting left interest rates unchanged.
"Stock markets across the world are falling and it basically stems from the US," said Hiroko Ota, the minister for economic and fiscal policy."Stock markets across the world are falling and it basically stems from the US," said Hiroko Ota, the minister for economic and fiscal policy.
"It is difficult at the moment to mull action by Japan alone. Instead, we should co-operate globally," she said."It is difficult at the moment to mull action by Japan alone. Instead, we should co-operate globally," she said.