European And Asian Stock Indices See Sharp Declines

European And Asian Stock Indices See Sharp Declines

(10/22/07 06:53) (CEP News) London Share prices have tumbled across Europe in early trading, reflecting a similar trend witnessed throughout Asia on Monday. At 5:35am EDT on Monday, Londons FTSE 100 was down 84.60 points or 1.3% to 6443.30, Frankfurt DAX down 96.83 points or 1.23% to 7789.29, Paris CAC 40 down 93.28 or 1.62% to 5647.20 and the Zurich SMI down 94.34 or 1.06% to 8842.86. Meanwhile, the Amsterdam AEX was down 10.10 or 1.83% to 540.95, Brussels BEL 20 down 69.64 or 1.58 to 4346.78, Madrid IBEX down 221.00 or 1.42% to 15,308.70 and the Moscow RTS down 28.00 or 1.31% 2114.42. Earlier, Asian markets first responded to heavy losses on Wall Street on Friday as concerns about the U.S. economy continued to make headlines. At the close of trading on Monday, Tokyos Nikkei was down 375.90 or 2.24% at 16438.47, Hong Kongs Hang Seng down 1091.42 or 3.70% at 283.73 and the Singapore STI down 105.34 or 2.81% at 3642.64. Stocks were also down in Australia, South Korea, Indonesia, Taiwan and the Philippines. Justin Urquhart-Stewart of Seven Investment Management, said worrying issues, which investors should be quite rightly concerned about, still persist. Inflationary pressures, both domestically and imported from China, are going to be an increasing concern, along with the ability to cut rates in the face of weakening economies, he said. Pressure on the consumer from both rising costs and a fracturing housing market will dent confidence and thus the opportunity for further growth, and then also the geo-political threats that are ever present but surface into peaks of worry at key moments. Currently, the concern over Turkish-U.S. relations and the threat of incursions into Iraq have pushed up crude prices to record levels never a positive sign for global growth and confidence, Urquhart-Stewart added. Analysts at Anglo Irish Bank echoed his sentiments in a British context. UK GDP, released on Friday, showed UK growth accelerating from the previous quarter. The economy has grown at the fastest pace in three years. However, it is worth noting that the FTSE 100 has opened 1.5% lower on Monday, they said. Matt Buckland, of CMC Markets said the slump was a sign of times to come. Friday's slump on Wall Street is going to dominate market sentiment as the new trading week gets under way. Obviously there's speculation that we may see a repeat of the losses from Black Monday some 20 years ago, and with little economic data being scheduled for release, it's going to be sentiment rather than the fundamentals that provide the bulk of the direction," Buckland told the BBC. However, Urquhart-Stewart said that although a crash was likely, the timing was impossible to predict, adding that things were different given the present circumstances. Firstly, both economically and politically, the world is a very different place with globalisation having opened up closed economies in a way thought unimaginable back then with Russia, India and China now having a significant impact on world trade and investment, he said. This means that investment markets have been spread around the world and are far less concentrated than just on the leading U.S. indices. Thats not to say that there cant be contagion
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European And Asian Stock Indices See Sharp Declines

between them, but there is at least some separation, Urquhart-Stewart added. Secondly, we should consider valuations. The U.S. market, although reaching record highs, the trailing price to earnings ratio on the S&P 500 index stood at 22 in 1987 compared to a lower figure of 18 today. Also the Bond market back then was in the depths of a bear market with 30 year yields at 10% compared to a mere 4.87% currently, he continued. Thirdly, after the crash, the NYSE implemented some control measures by way of circuit breakers to halt overheated markets getting out of hand. To date they have yet to have been enforced, Urquhart-Stewart added. Timing the market is impossible but adjusting for risk is always vital and yes, these are riskier times, he concluded. On Black Monday in 1987, the Dow Jones fell 23%, which under current valuation would mean a drop of over 3,000 points. By Gaurav Sharma, gsharma@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews. ca (END) CEP Newswires - CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca

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