Billions evaporate as shares slump

Wednesday February 07, 2018 Written by Published in Regional

WORLD – Fears of another plunge in Wall Street shares proved unfounded on Tuesday after the Dow Jones shrugged off an initial 500-point drop to post early gains.

 

It was a volatile open session yesterday morning as shares fell further into the red before investors regained their nerve and the Dow rose 184 points or 0.6% to 24,527.

Share prices globally plunged in recent days because of fears that US interest rates will rise faster than expected.

The panic spread after the Dow Jones Industrial Average suffered its biggest loss in more than six years on Monday, down 1175 points, 4.6 percent, to 24,345.75.

That was soon followed by Asian and European markets.

Japan’s Nikkei 225 index saw its biggest one-day point drop since 1990, ending 4.7 percent down at 21,610.24.

Its share index saw steeper falls overnight, with a loss of some seven percent at one point.

Hong Kong’s Hang Seng lost 4.5 per cent and in late trade, China’s Shanghai composite was down 2.7 per cent.

Tuesday saw markets in London, Frankfurt and Paris with initial losses of up to three percent before recovering some ground.

Analysts have said the swings in the US markets in part reflect big investors moving to sell stocks and put money in other assets, such as bonds, which benefit from higher interest rates.

After the Dow Jones suffered its biggest points drop in a single day the selling tsunami accelerated across the Pacific.

The Australian share market dropped $60 billion in value as markets throughout Asia

followed United States investors in a mad scramble for the exits.

Head of wealth research at Craigs Investment Partners, Mark Lister, said the New Zealand market could be down three or for percent, making it an “ugly day”.

New Zealand was not likely to fall as much as elsewhere, because the interest-rate rises that had led to the stock market plunges were not a factor here.

ister said New Zealand’s sharemarket hadn’t had the stellar rises other markets had, so was unlikely to fall by as much. People don’t need to panic, as they should be investing for the long-term.

“It’s not something impacting the economy, it’s limited to the sharemarket,” he said.

On Monday the benchmark NZX top-50 index closed down more than two per cent, its biggest one day fall since late 2016.

If the market falls continue they could prove problematic for Donald Trump who has consistently touted record high stock markets as proof that his presidency is boosting the economy.

US stocks have now lost $1 trillion in value in the first five days of February. However, the White House, responding to the market drop insisted on Monday night that long-term economic fundamentals “remain exceptionally strong”.

Vice President Mike Pence characterised the stock market’s plunge as “simply the ebb and flow of our stock market”.

“The era of cheap money is ending, and for markets who got addicted to it, it’s undoubtedly bad news,” said Hussein Sayed, the chief market strategist at currency dealer FXTM.         

            - PNC sources

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