World Markets Slide as Yen Skyrockets
U.S. markets fell slightly Monday morning, deepening the worst monthly slump in 70 years. The Dow Jones industrial average opened down more than 150 points, but recovered most of that loss within an hour of the opening bell, and the Nasdaq Composite Index was down 11.88 points, or 0.77 percent.
The U.S. Treasury’s plan to start distributing money to banks this week caused a hike in index futures, however, crude oil fell to a 17-month low, Bloomberg reported. Oil prices have been plummeting as recession fears grow and a drop in consumption is predicted. Global oil demand may decline for the first time in 15 years in 2008, the Centre for Global Energy Studies said Oct. 20, Bloomberg reported.
Japan’s Nikkei 225 index dropped to its lowest close in 26 years on Monday over concern that the high yen will hurt Japanese exports. The yen has surged to nearly a 13-year high because some investors content Japan would weather a global recession far better than many other nations, making the yen a highly sought-after currency.
European stock markets fell heavily in early trading on news of the Nikkei drop. The euro fell under $1.24 in early trading, hitting a two-year low. In London, the FTSE 100 index was down 4.9 percent Monday, Germany’s DAX was down 4.7 percent and France’s CAC-40 was down 6.8 percent.
Concern over the impact of the yen on the global markets led the G7 to release a statement on Sunday warning about the “recent excessive volatility” of the yen and could mean a coordinated intervention to slow the yen’s rise.
“The G7 statement has increased the chance of early coordinated rate cuts this week,” Hans Redeker, global head of FX strategy at BNP Paribas, told the Associated Press.
Roland Lescure, who manages the equivalent of $128 billion as chief investment officer of Groupama Asset Management in Paris, told Bloomberg news that European markets have “gone from financial worries to economic worries.”
“We’re looking for direction for the economy. The problem is stock market declines lead to more declines. It’s linked to forced selling,” Lescure said.
Emerging-market stocks also struggled for a fifth day as the International Monetary Fund continues to assess where its aid is needed and announced new rescue packages. The IMF agreed to lend Ukraine $16.5 billion on Monday and promised Hungary “a substantial financing package,” causing a 10 percent drop in the market there. Last week, Belarus asked the IMF for at least $2 billion.