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Recession Fears Batter Markets Across World
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Brazil's Bovespa index fell more than 10 percent, triggering a suspension in trading, while the local currency continued its drop against the U.S. dollar. Stock markets in Mexico, Chile and Colombia joined the trend.
Reports of poor earnings from major U.S. corporations such as Wachovia and Boeing fueled investor pessimism, as did news of sagging prices of commodities such as corn and soy, which are important exports for South America.
Markets in industrial countries took a beating as well. London's FTSE 100 and Germany's DAX index lost 4.5 percent, while France's CAC-40 finished 5.1 percent lower. Indexes closed down nearly 8.2 percent in Madrid and 3.6 percent in Milan.
After South Korean stocks fell to a three-year low Wednesday, the Kospi index dropped 6.6 percent in early trading Thursday. The country's troubled currency, the won, fell further against the dollar Wednesday. A $130 billion stabilization plan by the Seoul government has failed to overcome concern that a global recession will drag down South Korea's export-dependent economy.
In trading Wednesday, Japan's markets shed 7 percent of their value. Major exporters Sony and NEC Electronics were hit by sell-offs. Both companies are being squeezed between the soaring value of the yen, which makes Japanese goods more expensive, and the growing reluctance of U.S. and European consumers to keep on buying.
Japan's largest bank, Mitsubishi UFJ Financial Group, dropped 8.8 percent, after a newspaper report that its half-year profits would probably decline by 50 percent because of bad loans and write-offs on investments.
In Britain, Brown's bleak statement briefly drove the pound to its lowest level against the dollar since September 2003.
Rodney Barker, professor of government at the London School of Economics and Political Science, said that by "acknowledging the obvious" about a looming recession, Brown was trying to stay in control of political events. "It's a bit like being overdrawn at the bank," Barker said. "It's much better if you ring your bank manager and if you take initiative and give the impression of being vaguely in charge."
Sullivan reported from London. Correspondent Blaine Harden in Tokyo and special correspondents Brian Byrnes in Buenos Aires and Karla Adam in London contributed to this report.
