US stimulus package fails to lift markets

INTERNATIONAL stock markets spiralled downwards yesterday, on the back of a less-than-favourably received fresh stimulus package put forward by US economic policymakers and dire warnings from the World Bank.

European stocks hit a two-year low; all of the continent’s main national exchanges seeing falls of between 4% and 5%.

The US Federal Reserve’s two-day think-in didn’t come up with enough ideas to impress international investors, while World Bank president Robert Zoellick added pressure by saying the world’s leading economies need to act quickly to resolve their individual crises or risk ruining the global economy as a whole, adding that the world has now entered “a danger zone”.

At close of business in Europe, the main US markets were all significantly down in midday trading — the Dow Jones by 3.8%, the Nasdaq by 3.3% and the S&P-500 by 3.5%.

The Federal Reserve’s summing up that the US economy harbours “significant downside risks” was seized upon by analysts. Bloomberg news service quoted one Swiss-based banker: “To have a chance to resolve the European debt situation, we need world growth to remain robust. Any sign that this growth is at risk will shake markets. The word ‘significant’ used by the Fed is pretty strong and is contrasting with previous declarations that were much more constructive.”

The downbeat mood coming from the US, along with weak data from China (its manufacturing sector falling for the third straight month) and Europe (with German business activity hitting a two-year low) dragged down the European markets as investors became more worried over the prospects for global economic growth.

The FTSE in London fell by just under 5%, while Paris’ CAC-40 index was down 5.3% and the DAX in Frankfurt fell 5%. There were similar falls in Milan, Madrid and Stockholm.

Significant falls in the main Asian markets completed the picture — Tokyo down 2% and Hong Kong shedding another 4.8%.

In Dublin, the ISEQ was down by 3.21%, with just over €2 billion being wiped off the combined value of Irish shares yesterday. There were heavy falls for most Irish stocks, including the vast majority of the leading players, and 1c gains for Independent News & Media (INM) and fruit distributor Fyffes; along with a 2c rise for exploration company Providence Resources (on the back of it committing to drilling near Dalkey Island) summed up the low levels of buying.