Stock markets dive deeper

GLOBAL stocks plunged to new depths in the financial vortex yesterday with London shares down nearly 6.0 per cent after the Tokyo market came unhinged with its worst fall for more than 20 years.

London briefly slumped more than 7 per cent in early trading, despite the British government announcing a part-nationalisation of the country's eight main banks.

From Hong Kong to Paris, Singapore to Frankfurt, investors dumped shares as fears grew that policymakers may be powerless to stop the worst global financial shock since the Great Depression.

"Equity market retrenchment continues with stocks being sold off on a global basis," said CMC Markets dealer Matt Buckland.

In a dramatic day on fear-stricken markets, Tokyo plummeted 9.38 per cent by the close, the biggest loss since October 1987 in the wake of the "Black Monday" crash in the United States.

Hong Kong ended down 8.2 per cent at its lowest level in more than two years.

The bloodbath forced some countries to take dramatic steps to try to stem the selling. Indonesia suspended trading on its market after stocks plunged more than 10 per cent.

Trading was later frozen on Russia's two main stock markets after plunges of more than 11 per cent on opening.

Elsewhere in early European trade, London recovered slightly to post a loss of 5.58 per cent, Frankfurt lost 6.72 per cent, Paris dived 8.18 per cent and Madrid tumbled 5.41 per cent.

"No one wants to take risks right now," said Hirokazu Fujiki, a strategist with Okasan Securities. "There's no near-term bottom in sight."

He said the market was "pressuring monetary authorities to take coordinated action, notably joint interest rate cuts", ahead of a meeting of top world finance chiefs in Washington tomorrow.

The latest plunge came after Wall Street's Dow Jones Industrial Average sank more than 500 points or 5 per cent on Tuesday to a five-year closing low.

In foreign exchange trading, the US dollar slumped below ¥100 for the first time in six months as investors flocked to the yen as a haven.

"No one knows for certain now what they can rely on," said Hironobu Hagi, deputy general manager at capital market division of Shinsei Bank.

"We're seeing panic selling. Once players see a sign of selling, everybody tries to jump on the bandwagon," he said.

Global central banks meanwhile pumped billions of extra US dollars into the financial system while the Hong Kong Monetary Authority said it would cut its key interest rate by 100 basis points by today.

The Bank of England was beginning its latest monthly policy meeting, with markets widely expecting a cut to British interest rates of at least a quarter-percentage point today.

The US Federal Reserve said on Tuesday that it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and fight off the liquidity crunch triggered by a wave of US mortgage defaults.

But markets took little comfort from the latest measures. Wall Street's Dow Jones index sank 5.11 per cent to a five-year closing low on Tuesday.

Federal Reserve chairman Ben Bernanke hinted that there could be a US interest rate cut soon as the outlook for economic growth worsened.

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," Bernanke said.

In the Middle East, stock markets plunged again.AFP