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Late Sell-Off Sinks Markets
A Kuwaiti trader holds a wad of money during a protest outside the stock exchange in Kuwait City yesterday after the government's actions to avoid a major bank collapse failed to stem a decline in stock prices.
(By Yasser Al-zayyat -- Afp/getty Images)
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Overseas markets plummeted yesterday, setting the tone for Wall Street's opening.
In Asia, Japan's Nikkei fell 6.4 percent, closing at its lowest level in 26 years. Japan's two largest banks fell 15 percent. Prime Minister Taro Aso ordered the government to prepare emergency measures to stabilize markets. The measures are expected to include government purchase of bank stocks, tighter rules on short selling and a fivefold increase in the amount of government money that can be injected into banks.
Hong Kong's market was rattled by huge sell-off, driving the Hang Seng index down 12.7 percent. Stocks in China fell about 6 percent, with the Shanghai composite index slipping to its lowest level in more than two years. The major exchanges in Europe posted losses between 2.8 to 4 percent, indicating fears that recent government measures may not be enough to avoid recession.
Kuwait stepped in yesterday to avoid a major bank failure, South Korea cut interest rates, and the world's top industrialized nations hinted at possible action to curb the rapid appreciation of the Japanese yen against the U.S. dollar. Over the weekend, the International Monetary Fund said it had reached preliminary agreement on rescue plans for Hungary and Ukraine.
That U.S. trading was not dragged down even more by the negative foreign news is a sign that some stability may be emerging, said Richard Cripps, chief investment officer at Stifel Nicolaus in Baltimore.
"Perhaps selling pressure is starting to abate, even though stock prices reflect difficult times ahead," he said.
Correspondent Blaine Harden in Tokyo contributed to this report.
