Stocks down as economic fears continue

Fears over the US economy continue as Wall Street losses provoke a broad sell-off in Asian markets. This morning, European shares have declined sharply in early trading, reflecting declines in East Asia.

The UK’s FTSE 100 index was down 1.4% to 6,435 just after noon today whereas Germany’s Dax lost 1.4% and France’s Cac lost 1.3%. Tokyo’s Nikkei index closed 2.2% lower.

The Dow Jones, the main US share index, fell 367 points last Friday, which saw the 20th anniversary of the Black Monday stock market crash.

The sharp declines were triggered by fears that the full impact of the US housing slump has yet to filter through. It all began when Caterpillar, the building equipment group, slashed its profit forecast. The group believes that the US economy would be “near to, or even in, recession” next year.

Matt Buckland, a trader in London with CMC Markets, said that Friday’s slump on Wall Street is going to dominate market sentiment as the new trading week begins.

There is obviously speculation that there may be a repeat of the losses from Black Monday 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 added Mr Buckland.

The Dow Jones fell 23% on Black Monday in 1987. Today, this would result in a decline of over 3,000 points.

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