Blood flow in the street on Friday

LONDON, 24 October 2008 Friday

Investor panic about a looming global recession sparked massive stock market losses in Asia and Europe on Friday, as concern grew that the financial crisis was taking a heavy toll.

Tokyo lost 9.60 per cent, ending below the key 8,000-point level for the first time in more than five years as the yen soared and after a profit warning from tech giant Sony.

And the Hong Kong market closed with a loss of 8.3 per cent.

Sydney ended with a loss of 2.6 per cent.

The Straits Times Index fell 145.39 points or 8.33% to 1,600.28. It was the index's lowest closing level since September 2003.

The Kuala Lumpur Composite Index shed 32.21 points to 859.11 or 3.6%.

"Volatility and uncertainty seem to be the watch words at the moment," said CMC Markets trader Matt Buckland in London.

"Asian markets have again been under pressure overnight whilst there's also a degree of concern surrounding the corporate forecasts that came out from across the Atlantic last night."

European equities spiralled lower, with London stocks plunging 6.5% after data revealed that Britain's economy shrank 0.5 per cent in the three months to September from the previous quarter, marking the first contraction since 1992 and placing it close to recession.

Elsewhere, Frankfurt tumbled as much as 6.71% and Paris was down about 5% in early morning trade, before European markets trimmed their losses somewhat.

The yen soared to a 13-year high against the dollar and to a six-year peak against the euro as investors took shelter from the latest storm lashing global financial markets.

The European single currency meanwhile tumbled underneath 1.27 dollars, hitting a two-year low on expectations of eurozone interest rate cuts and slowing economic growth, dealers said.

"The best word to describe what's going on right now is panic," said Credit Suisse strategist Satoru Ogasawara. "When you don't know what will come next, you tend to flee to the safest place."

South Korean shares dived 10.6 per cent , a day after a 7.4 per cent plunge after the domestic economy grew at its slowest pace for four years and Samsung Electronics reported a sharp drop in quarterly profit.

"The market seems to be still in panic," Lee Kyung-Soo, from Taurus Investment & Securities, told Dow Jones Newswires in Seoul.

The sell-off came as Asian leaders meeting in Beijing agreed to set up an 80-billion-dollar fund to fight the global economic crisis.

The deal between South Korea, China, Japan and the 10 members of the Association of Southeast Asian Nations is the first major coordinated regional action since the full force of the financial turmoil erupted last month.

In Australia, three big investment firms said they had frozen at least 3.66 billion US dollars' worth of investors' funds to stem an exodus sparked by a government deposit guarantee.

The rout supported the yen, particularly against higher-yielding currencies such as the euro, the Australian dollar and the British pound.

The dollar fell to 95.32 yen, its weakest since August 1995. The euro slipped below 123 yen for the first time in almost six years as investors unwound risky bets funded with cheap Japanese credit.

The stronger Japanese currency is bad news for exporters such as Sony, which warned it now expects its annual profits to drop by more than half.

Governments around the world have pumped cash into the banking system in recent weeks to try to contain what former Federal Reserve chairman Alan Greenspan who ended his 18-year stint as chairman of the US Federal Reserve before a years-long housing bubble burst, warned that a "once-in-a-century credit tsunami" would pummel consumer spending and jobs.

While there have been some tentative signs of an easing of the credit crunch, concerns are growing about the worsening outlook for economic growth and corporate earnings.

"The theme of weaker global growth has replaced the issue of troubled banks for now and continues to weigh on investor psyches," said analysts at UBS.

"But it was only a marginal gain after massive selling. The direction of global markets has not changed," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp. in Tokyo.

U.S. stocks plunged at Friday 24 Oct 2008 start, with the Dow Jones Industrial Average off more than 300 points amid worldwide deleveraging as fears intensified of a global recession.

The Dow Jones Industrial Average fell 408.59 points to 8,282.66 at the start of Friday 24 Oct 2008 trading hours

The S&P 500 dropped 48.73 points to 859.38, while the Nasdaq Composite declined 89.31 points to 1,514.60 at the start of Friday 24 Oct 2008 trading hours

Should the Dow fall 1,100 points, or drop by 10%, trading on the New York Stock Exchange will be halted.

The Chicago Mercantile Exchange's circuit-breaker rules went into effect Friday as plunging S&P 500 and Nasdaq 100 futures contracts reached pre-specified limits.

The CME limits the S&P 500 futures to a drop of a 60 points and the Nasdaq 100 futures to a drop of 85 points during electronic action.

They can still be traded electronically, only they can't trade below those levels. Those contracts can fall more once the pits open at 9:30 a.m. Eastern.

The declines came after wave of selling swamped equities markets in Asia and Europe.
Meanwhile, the contract on the Dow Jones Industrial Average was just a fraction above its 550-point downside limit.

The New York Stock Exchange has similar rules for stocks.

The so-called circuit-breaker rules first went into effect following the 1987 market crash.

The rules call for trading halts of differing lengths in the event of declines of 10%, 20% and 30% in the Dow Jones Industrial Average based on the average closing value of the blue-chip benchmark over the month immediately prior to the start of the current quarter.

A 1,100 point in the Dow before 2 p.m. halts trading for an hour; between 2 p.m. and 2:30 p.m., it would be 30 minutes; and it won't have an effect after that unless a "Level 2" halt of 2,200 points is reached.

The 2,200-point drop would trigger up to a two-hour halt, while a 3,350-point drop would halt trading for the rest of the day.