Nick Fletcher and Angela Balakrishnan
Thursday November 1, 2007
Guardian Unlimited
Stock markets around the world were in retreat today as fears of the credit crunch re-emerged.
The FTSE 100 index closed down 135 points to 6568.4, a fall of 2.02%. On Wall Street, the Dow Jones Industrial Average was down 205.5 points by 4.30pm at 13,724.5, a fall of 1.48%, and there were similar sharp falls in markets across Europe.
The turmoil was sparked by a downgrade of Citigroup, the biggest bank in the US, by analysts at CIBC World Markets. They claimed that Citigroup needs to raise $30bn (£14.4bn) in capital, and suggested its share price could tumble by as much as 28%. Merrill Lynch then added to the gloom in banking sector by warning that consumer credit problems are likely to spread from the sub-prime mortgage market to other areas, such as credit cards.
Traders were also spooked by a £910m write down from Credit Suisse this morning, to take account of the effect of the US sub-prime crisis on credit markets.
The Dow's fall was also caused by oil group ExxonMobil, which produced worse-than-expected quarterly figures despite the record crude prices.
Further gloom came with the latest survey on US manufacturing growth, which slumped to its slowest pace since March as tighter credit conditions and the crumbling housing market took their toll on output.
The Institute for Supply Management said its manufacturing index fell to 50.9 from 52 in September, below forecasts of around 51.5. The current level is just above the 50 mark, which separates expansion in the sector from contraction.
Analysts said the ISM data raised fears that the Federal Reserve's cuts in the interest rate to 4.5% will not be enough to soften the impact of the credit crunch on the US economy.
"It does appear that the impact of the slowdown in the financial, housing and transportation segments has spilled over into manufacturing," ISM said in its report.
Exports have benefited from a weak dollar which has made US goods cheaper in many other countries, including the UK.
Overall the production index slipped into contraction territory, tumbling by five points to 49.6.
"The details highlight the weakness of the domestic economy and the support being provided by global growth and weak US dollar," said strategists at RBC Capital Markets.
The UK banks, regulators and government are set to meet today to discuss the current liquidity crisis. Adding to the uncertain mood were fading hopes that the Bank of England would follow the US Federal Reserve's lead and cut interest rates at its meeting next week.
There was however more evidence today suggesting the next reduction in UK rates might not be too long in coming. UK manufacturing slipped back in October and the CBI distributive trades survey showed a fall last month.
The turmoil was sparked by a downgrade of Citigroup, the biggest bank in the US, by analysts at CIBC World Markets. They claimed that Citigroup needs to raise $30bn (£14.4bn) in capital, and suggested its share price could tumble by as much as 28%. Merrill Lynch then added to the gloom in banking sector by warning that consumer credit problems are likely to spread from the sub-prime mortgage market to other areas, such as credit cards.
Traders were also spooked by a £910m write down from Credit Suisse this morning, to take account of the effect of the US sub-prime crisis on credit markets.
The Dow's fall was also caused by oil group ExxonMobil, which produced worse-than-expected quarterly figures despite the record crude prices.
Further gloom came with the latest survey on US manufacturing growth, which slumped to its slowest pace since March as tighter credit conditions and the crumbling housing market took their toll on output.
The Institute for Supply Management said its manufacturing index fell to 50.9 from 52 in September, below forecasts of around 51.5. The current level is just above the 50 mark, which separates expansion in the sector from contraction.
Analysts said the ISM data raised fears that the Federal Reserve's cuts in the interest rate to 4.5% will not be enough to soften the impact of the credit crunch on the US economy.
"It does appear that the impact of the slowdown in the financial, housing and transportation segments has spilled over into manufacturing," ISM said in its report.
Exports have benefited from a weak dollar which has made US goods cheaper in many other countries, including the UK.
Overall the production index slipped into contraction territory, tumbling by five points to 49.6.
"The details highlight the weakness of the domestic economy and the support being provided by global growth and weak US dollar," said strategists at RBC Capital Markets.
The UK banks, regulators and government are set to meet today to discuss the current liquidity crisis. Adding to the uncertain mood were fading hopes that the Bank of England would follow the US Federal Reserve's lead and cut interest rates at its meeting next week.
There was however more evidence today suggesting the next reduction in UK rates might not be too long in coming. UK manufacturing slipped back in October and the CBI distributive trades survey showed a fall last month.
... ¿Cuánto tienes debajo del COLCHON, vieja?
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