World
stocks skidded lower on Thursday, stung by the Federal Reserve's
pessimistic assessment of the US economy and the perceived ineffectiveness of measures to kickstart growth.
Benchmark oil tumbled below $84 a barrel while the dollar strengthened against the euro but fell against the yen.
European shares were sharply lower in early trading. Britain's FTSE 100 dropped 3.2 per cent to 5,121.71 and Germany's DAX stumbled 3.4 per cent to 5,249.80. France's CAC-40 fell 3.6 per cent to 2,830.87.
Ahead of the opening bell,
Wall Street was bracing for losses.
Dow Jones industrial futures were down 1.1 per cent at 10,886 and S&P 500 futures shed 1.3 per cent to 1,141.10.
Shares in Asia tumbled earlier in the day. Japan's Nikkei 225 fell 2.1 per cent to close at 8,560.26. South Korea's Kospi slid 2.9 per cent to 1,800.55. Hong Kong's Hang Seng dived 4.9 per cent to 17,911.95. Australia's S&P/ASX 200 was 2.6 per cent down at 3,964.90.
Dangerous phase for world economy: IMF Investors were beginning to despair over the US economy despite an announcement by the Fed of a new bond-buying program meant to stimulate lending and growth.
"What we could or should do has already been done - and it still hasn't supported the market. Nothing can help the market. So it feels very dangerous," said Linus Yip, strategist at First Shanghai Securities in Hong Kong.
"I expect panic selling," he said. Then, "hopefully the market will find its short-term bottom."
Energy shares in Australia plummeted amid fears of a global recession. BHP Billiton, the world's largest mining company, lost 4 per cent. Rival Rio Tinto Ltd. plunged 6.5 per cent. OZ Minerals dropped 7.7 per cent.
In Hong Kong, blue chip property developers were jolted by losses. China Resources Land Ltd tumbled 7.7 per cent while China Overseas Land & Investment slid 6.5 per cent. China Vanke Co lost 8.5 per cent.
Falling gold prices hit precious metal stocks. Hong Kong-listed Zijin Mining Group, China's No. 1 gold miner, lost 9.9 per cent. Newcrest Mining, Australia's biggest gold miner, fell 3.1 per cent.
Ben Potter of IG Markets in Melbourne, Australia said in a report that he expected "a session of heavy selling as the world reacts to the Fed's downbeat outlook for the US economy."
In a highly anticipated move, the Fed on Wednesday announced it would buy long-term Treasury bonds to help the US economy. But Wall Street stocks fell anyway because the US central bank made it clear that a full US economic recovery was likely years away. Stocks recently have been extremely volatile over fears of another recession.
The Dow Jones industrial average lost 2.5 per cent to close at 11,124.84. The Standard & Poor's 500 index fell 2.9 per cent to 1,166.76. The Nasdaq composite fell 2 per cent to 2,538.19.
The Fed said after a two-day meeting that it would buy long-term Treasurys and sell short-term. The move is intended to drive down interest rates on long-term government debt, and could lower rates on mortgages and other loans. It surprised investors when it said it would include more 30-year bonds in its purchases than expected.
The Fed said it would buy $400 billion in 6-year to 30-year Treasurys by June 2012. Over the same period, it planned to sell $400 billion of Treasurys maturing in 3 years or less.
The inclusion of more 30-year bonds than expected means the Fed saw the need to keep very long-term rates lower for an extended period. Many analysts viewed the move as an acknowledgment that the US economy's problems are long-term.
The Fed also bleakly stated that the economy has "significant downside risks" and that a number of problems won't be easily solved, including high unemployment and a depressed housing market.
On top of that: a sovereign-debt crisis in Europe that is threatening to bankrupt Greece, cause Italy to default on debts and infect the continent's banking system.
The price of oil, meanwhile, continued its slide on expectations that there'll be less demand for energy amid US economic doldrums.
Benchmark crude for October delivery was down $2.02 per barrel to $83.89 in electronic trading on the New York Mercantile Exchange. The contract fell $1.00 to settle at $85.92 on the Nymex on Wednesday.
In currency trading, the dollar fell to 76.35 yen from 76.56 yen late on Wednesday in New York. The euro fell to $1.3517 from $1.3667.
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