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13th November, 2008
TOKYO: World markets remained in cautious mood Wednesday as fears mounted that the financial crisis will claim casualties among some of America’s biggest corporate giants.
Fears of a collapse of General Motors and an enormous loss at insurance giant American International Group have brought into sharp focus the impact of the global credit crunch on corporate America, dealers said.
“The world economy is worsening further due to trouble stemming from the United States,” said Nikko Cordial broker Hiroichi Nishi said.
Investors refrained from active trading, opting to wait for further clues on how bad the global economic downturn will become.
Japan’s Nikkei index was down 0.3 percent by lunch, off its early lows, after the Dow Jones index slid 1.99 percent overnight in the United States.
“The decline was in line with a slump in US shares overnight,” said Toshikazu Horiuchi, an equity strategist at Cosmo Securities. “Players are likely to stay on the sidelines.”
Seoul dropped 2.2 percent at opening and Australian share prices fell 1.5 percent in early trade.
Some markets managed to eke out a gain, including Hong Kong, where stocks were up 0.8 percent as investors bet that China will cut interest rates this month after inflation hit a 17-month low in October.
There were also hopes that world powers will agree on new action to tackle the worst financial crisis in decades when they meet in Washington at the weekend.
“There are some expectations for measures to be taken around the world. Some countries cannot help but cut their interest rates further. Each country must take action without any delay,” said Horiuchi.
But markets appeared to overlook government action in the United States to set a floor on home foreclosures and downward spiralling real estate prices with a sweeping, aggressive programme to modify troubled mortgages.
GM’s chief executive Rick Wagoner has said that the automotive giant only has cash at hand to stay alive for a few more months.
After plunging 22 percent Monday, GM shares dropped another 13.02 percent Tuesday to 2.92 dollars, their lowest level since 1943, after Deutsche Bank analysts said the shares could be worth nothing within a year.
Britain and the European Union called for strong joint action to hold off the recession threatening leading economies, as more grim economic and corporate news battered sentiment on Tuesday.
The World Bank announced a 100-billion-dollar increase in aid for developing countries.
Markets were nervously waiting for US October retail sales figures and a key consumer confidence indicator due Friday, expected to reflect a sharp deterioration in the world’s biggest economy.
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