Global stock markets took another beating yesterday, but after massive losses there were some signs of stabilisation as investors combed through the wreckage to look for bargains.
Dealers said a steadier start on Wall Street helped calm nerves after a brutal sell-off wiped out trillions of dollars on fears the US and eurozone debt crises combined with a sharp growth slowdown pointed to another global recession.
They said investors were looking at newly attractive valuations, some back at near 2008-2009 levels, but the question of timing remains – if the markets have further to fall, who wants to buy now and risk a loss when they can wait and get an even better deal later.
That in turn only adds to the downward pressure but means that when a turn does come, it could be very sharp and investors will want to catch it quickly.
Holger Schmieding at Berenberg Bank said market panics are self-fulfilling since by themselves they undercut economic growth and the public finances, adding to the problems – but they always end. “No panic lasts forever,” he said, noting the 1987 sell-off lasted four weeks and the 2008 crisis, six months, adding that the only thing that is certain is that the markets will “be extraordinarily volatile over the coming months.”
Asian markets tumbled earlier yesterday, sending Europe down again very sharply at the start, with losses of four per cent and more in some centres before they picked up.
In New York, stocks opened firmer after major losses Thursday when the tech-heavy Nasdaq Composite plunged more than five per cent. The blue-chip Dow Jones Industrial Average was off 0.25 per cent at around 1600 GMT while the Nasdaq Composite gained 0.32 per cent.
Concerns about faltering US economic growth and the eurozone’s debt crisis have shaken global stock markets in the past several weeks.
Yesterday, JPMorgan Chase became the latest bank to cut its US growth forecasts, with the fourth quarter now put at just 1.0 per cent instead of 2.5 per cent. “The risks of a recession are clearly elevated,” the bank said, although it stopped short of predicting that the US economy would contract.
In London, the FTSE 100 index of leading companies closed 1.01 per cent lower at 5,040.76 points. In Frankfurt, the main DAX index tumbled 2.19 per cent to 5,480 points and in Paris the CAC 40 dropped 1.92 per cent to 3,016.99 points.
Other European markets suffered similar falls, with Madrid down 2.11 per cent and Milan off 2.46 per cent but were mostly off their lows – for example the Swiss market finished down 1.97 per cent after a plunge of 4.62 per cent at one stage.
Weak data continues to unnerve investors “and with volatility remaining high across global equity markets, the reaction in the markets... remains quick and severe,” said Joshua Raymond, chief market strategist at City Index in London.