Fears play out on Friday as shares plunge and gold hits record level
Following yesterday’s heavy losses in Europe and rising concerns over European banks’ liquidity, Asian shares drop but losses are contained. Gold reaches record highs. Uncertainty dominates financial markets, as investors show readiness to act on the slightest news. Many fear speculators.
Hong Kong (AsiaNews/Agencies) – Asian shares fell Friday morning, after global stocks endured a black Thursday yesterday, following a US Federal Reserve report expressing concerns over European banks' liquidity. Gold jumped to US$ 1,826.46 per ounce (a 5 per cent weekly rise), a new record on Asian markets as investors sought safer havens for their money.
Comments by the Federal Reserve unleashed the plunge, despite warnings by the European Central Bank on 6 August that it was ready to provide extra liquidity.
US gold also climbed to an all-time high at US,839.8, and is expected to stay high because of market uncertainty.
Asian stocks are concerned about the solidity of European banks, which hold large amounts of bad loans and are held down by the sovereign debt of several nations. They are also worried by China’s growth, which has driven the world economy so far, but is now facing structural problems like overreliance on Western markets and high inflation.
The worldwide selloff came after Wall Street investment bank Morgan Stanley warned that the US and eurozone economies were “dangerously close” to a double-dip recession.
Manufacturing activity in the US's mid-Atlantic region slumped to its lowest level since March 2009, fuelling speculation that the US economic growth has stalled. Meanwhile, unemployment claims rose sharply.
By mid-day, the headline index at the Tokyo Stock Exchange had lost 2.15 per cent, with financial shares particularly hit. Similarly, Hong Kong lost 2.81 per cent, whilst Singapore's headline share index was off by 2.55 per cent. In Shanghai, China's benchmark stock index opened today down by 1.6 per cent. In Seoul, the benchmark KOSPI plunged a hefty 4.49 per cent after bad news put top South Korean exporters like Samsung Electronics and Hyundai in the firing line. The MSCI Asia Pacific Index also slid 2.7 per cent. In Europe, all stocks were down.
The Dow Jones Industrial Average was down 3.7 per cent at the closing bell, yesterday. Losses were even worse in Europe on Thursday, as London stocks closed down 4.5 per cent, and Frankfurt dropped 5.8 per cent.
In Paris, Credit Agricole was down 9 per cent and Société Générale lost more than 12 per cent.
At present, no one dares predict what will happen next. As uncertainty prevails, fears persist that the sovereign debt of many European nations might undermine banks and the financial sector.
Everyone is waiting to see what the governments of the main players will do. for their part, markets remain highly volatile and ready to jump at any news.
Many believe that speculators are trying to trigger the fall of stocks. “The situation in Europe seems to be deteriorating by the day,” one expert said.
Emotions rather than cool assessment of the situation appear to have taken over, thus disrupting the process of addressing the extant problems.
Starved for news, markets are ready to act on the slightest information. Next week, the US should release its GDP data.