Source TheStar
WELLINGTON: New Zealand shares plunged 4.7 percent in early trading Tuesday, after the U.S. Congress failed to ratify a rescue package for the troubled American financial sector.
The benchmark NZX 50 index lost 4.71 percent within an hour of opening, falling to 3,044.97 points from its Monday close at 3,188.54, following European and U.S. markets sharply downwards.
At 11:00 a.m (2200 GMT Monday) the NZX 50 had recovered slightly and was down 4.3 percent at 3,051.76.
The fall follows the Dow Jones Industrial Average posting its biggest daily points drop after the U.S. House of
Representatives failed to approve the rescue package.
The Dow Jones industrial average ended down 777.68 points, or 6.98 percent, at 10,365.45.
The Standard & Poor's 500 Index was down 8.79 percent at 1,106.42, and the Nasdaq Composite Index was down 9.14 percent at 1,983.73.
Share prices on the London Stock Exchange plummeted on Monday, closing 5.3 percent lower.
The FTSE 100-share index lost 269.70 points to 4,818.77.
The Irish Stock Exchange suffered its worst fall in history Monday, shedding 12.7 percent of its value amid continued global anxiety about the solvency of banks.
The 481-point drop to 3,304 shattered the previous worst day in Irish trading: Oct. 28, 1987, when the Dublin market fell 8.8 percent in the wake of Black Monday.
Ireland's market has been among the worst performers in Europe over the past year because it is heavily weighted in favor of financial stocks.
As of Monday the index had lost 72 percent of its value since reaching its record high of 11,815 17 months ago.
Monday's biggest fallers were the big four financial stocks in Ireland: Allied Irish Banks PLC, down 16.7 percent to euro5.00 (US$7.20); Bank of Ireland, down 17.8 percent to euro3.37 (US$4.85); the top mortgage provider, Irish Life & Permanent PLC, down 38 percent to euro3.57 (US$5.14); and niche corporate lender Anglo-Irish Bank Corp., down more than 45 percent to euro2.30 (US$3.31).
Latin American stocks plunged Monday as U.S. lawmakers rejected a US$700 billion bailout package meant to reboot the global economy and shares of key Brazilian companies plummeted more than on any day in nearly 10 years.
Sao Paulo's Ibovespa stock index led losses, tanking 13.8 percent before regaining some ground, even as Brazil's president insisted contagion from the world financial crisis would be small.
Trading was automatically halted for 30 minutes after the Ibovespa crossed the 10 percent loss threshold.
Losses worsened after selling resumed, but the index regained ground late to close down 9.4 percent at 46,028.
It was the index's worst one-day slump since falling 10 percent on Jan. 14, 1999, the last time trading was halted.
Losses were seen across all sectors, although Brazilian steelmakers and Companhia Vale do Rio Doce SA, the world's biggest producer of iron ore, steel's raw ingredient, were hit particularly hard on concern that slowing growth will cut demand for steel.
Brazil's currency, the real, closed down 6.4 percent against the U.S. dollar, reaching its lowest level since Sept. 5, 2007.
President Luiz Inacio Lula da Silva lashed out against excesses by U.S. and European bankers that he said could scuttle economic advances made by developing nations in recent years.
"We can't be turned into victims of the casino erected by the American economy,'' Silva told reporters after earlier insisting that Brazil faced few risks from a U.S. economic crisis.
"It's not fair for Latin American, African and Asian countries to pay for the irresponsibility of sectors of the American financial system.''
Buenos Aires' Merval index meanwhile dropped 8.7 percent to close at 1,545, while Mexico's main index slipped 6.4 percent to close at 23,956.
Chile's Ipsa index closed down 5.5 percent to 2,631.
Colombia's IGBC index dipped 2.4 percent to 9,140.
Mexican billionaire Carlos Slim Helu described the current financial crisis as "the worst I have known in all of my life, and the most complex since 1929,'' when stock markets plunged, triggering the Great Depression.
"It's obviously bigger, because we are talking about an economy that is a lot bigger,'' said Slim, who has been ranked one of the world's richest men.
Risk-averse investors have pulled cash from emerging markets in recent weeks, dumping company shares amid fears that the current financial crisis will tighten access to credit and slow growth around the world.
The carnage hit a low-point in Latin America on Monday after the U.S. House of Representatives rejected a bailout plan, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.
Many analysts had considered the plan key to restoring confidence in the global economy.
A flurry of bank bailouts also swept Europe, including the British government's nationalization of mortgage lender Bradford & Bingley and the partial takeover of struggling bank Fortis NV by Belgium, the Netherlands and Luxembourg.
The European Central Bank meanwhile joined the U.S. Federal Reserve in doubling the credit swap line that makes dollars available to cash-hungry banks in a bid to temper tightening credit.
So far, no Latin American banks have neared insolvency - although some are owned by U.S. and European institutions, raising fears that private credit sources could soon dry up.
"Brazil is taking the biggest hit because it has the largest amount of foreign investors and the biggest and most liquid market,'' said Enrique Alvarez, head of research for Latin American financial markets at IDEAglobal in New York.
But he also warned that Mexico and Colombia could be seriously affected, given their close political, economic and trade ties to the U.S.
In Argentina, the crisis is likely to cause capital flight, interest rate hikes, currency reserve losses, and reductions in consumption and bank lending, said Jose Luis Espert, an economist at the Espert y Asociados consultancy in Buenos Aires.
"We're going to continue seeing high volatility,'' added Juan Ignacio Di Santo, an analyst at the Buenos Aires-based brokerage Puente Hermanos.
"The contagion is across the board.''
Despite Monday's losses, Silva insisted that Brazil's lower debt burden and diversified export markets have well-positioned the country to withstand a global downturn.
"We know this crisis is serious, we know that it's going to reduce global credit, but we're sure that our exports will continue going well and our industry will continue growing,'' he said.
Brazil, Latin America's largest economy, has enjoyed an extended consumer spending boom, fueled by rising demand for its iron ore, farm and manufactured exports.
The country paid off all its foreign debt in February and now has currency reserves of more than US$200 billion.
Similar conditions have helped many Latin American economies outperform developed nations this year, even as the U.S. mortgage crisis deepened.
But that good run was clearly in jeopardy on Monday.
"You have a very large increase in risk aversion'' as markets correct to match the growing decline in global economic activity, IDEAglobal's Alvarez said.
"Market participants are scared of the potential of U.S.-led global recession starting to take shape.''
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