World markets follow US plunge

World stock markets have plunged downwards following a day in which Wall Street finished on a five-year low.

The slide in Asian and European shares extended a global sell-off that accelerated overnight amid lowered projections for US economic activity next year from the Federal Reserve and worries over the fate of America’s Big Three carmakers, pleading for emergency government loans.

The uncertainty facing companies around the world was evident after US consumer prices fell 1% last month, the largest amount in the past 61 years. While beneficial to consumers, lower prices hurt corporate profits and raise the threat of deflation.

The rout continued as trading opened in Europe, where Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 all fell more than 2% early in the session. Oil and other commodities were also down.

“We’ve gone past the poor sentiment stage,” said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong.

“People are looking for any kind of positive and there are just no positives out there. Everyone seems to be united in the depressed global outlook,” he said. “Whether it’s commodities or equities, everything seems to be on a downturn.”

Tokyo’s benchmark Nikkei 225 average slid 570.18 points, or 6.9%, to 7,703.04. Japan said exports in October sank 7.7%, the biggest decline since 2001, causing the country – an export powerhouse – to report a rare trade deficit.

Earlier this week figures showed Japan had slid into a recession in the third quarter, joining Hong Kong and the 15 nation euro-zone in two straight quarters of economic contraction. With demand shrinking abroad and a surging yen further undercutting company earnings, Japanese exporter shares took a hit.

Trade was similarly grim across Asia.

In South Korea, the main index fell for its eighth straight session, losing 6.7% to 948.69, as the country’s currency, the won, fell to its lowest level in more than a decade. Hong Kong’s Hang Seng benchmark sank 517.24 points, or 4%, to 12,298.56.

In Australia, the main stock measure retreated 4.2% as weakening commodity prices dragged down the country’s resource giants – BHP Billiton and Rio Tinto were both down 9% or more.

In New York yesterday the Dow Jones industrial average tumbled 427.47 points, or 5.07%, to 7,997.28, while the S&P 500 slid 6.12% to 806.58. Both closed at their lowest levels since March 2003, and are rapidly approaching the lows of the 2000 to 2002 bear market.

Wall Street appeared poised for another bout of selling today. Dow futures were down 92 points, or 1.1%, to 7,935, while S&P futures were down 12.6 points, or 1.6%, to 799.9.