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Recession Fears Drive Down Global Markets

Asian stocks tumbled for a third straight day. Japan's Nikkei lost more than nine percent of its value, which was an 800 point decline. The Nikkei was not alone, stocks in South Korea, Thailand and Hong Kong all lost value. Video by AP
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By Blaine Harden and Howard Schneider
Washington Post Foreign Service
Friday, October 24, 2008; 6:05 PM

TOKYO, Oct. 24 -- A recession-driven wave of selling gutted Asian and European markets Friday, with tumbling corporate profit reports and poor economic news from the United Kingdom pushing major exchanges to near double-digit percentage losses.

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At the same time, major oil exporting countries slashed output in acknowledgement of the sluggish global economy.

Bad news seemed to synchronize around the globe: Just as Asian exporters such as Samsung and Sony were reporting steep declines in profit, a result of weakening demand in the developed world, the United Kingdom said its economy shrank 0.5 percent from July through September compared with the three previous months -- a sharper than expected contraction.

Even good news had a flip side. Sales of existing homes in the United States jumped an unexpected 5.5 percent and the inventory of unsold homes fell -- but the buying was driven by a nearly 10 percent drop in the median price.

By the end of the trading day, markets in Asia were off anywhere from 9 to 11 percent, while European exchanges fell between 5.6 and 6.4 percent. London's FTSE closed down 6.4 percent, while France's CAC 40 and Germany's Dax were down 5.6 percent each. Wall Street also was down sharply.

The Organization of Petroleum Exporting Countries, meanwhile, responded to falling oil prices by cutting output targets for its 11 members by 1.5 million barrels per day, or about 5 percent of the current 28.8 million barrels per day.

Oil prices have fallen in recent weeks by nearly 60 percent from last July's record of more than $147 per barrel, with crude currently trading at about $65 per barrel.

Interviewed on CNBC as he left an emergency meeting of the group in Vienna, Qatari oil minister Abdullah bin Hamad al-Attiyah said the cartel was responding to the fall in world demand, a fact that, coupled with the financial crisis, has upended the budgets of OPEC members.

"We hate to cut production, but we've been forced because nobody will buy it," he said. "We produce for somebody to buy. . . . We can't produce and nobody buy it." Further cuts are possible, he said, "if the market has deteriorated" when OPEC next meets in December.

"Demand is collapsing," said Rafael Ramirez, oil minister for Venezuela.

The new quotas will take effect in November.

Along with being rattled by a global financial crisis, investors and policymakers are now watching economic data and corporate profits for signs of weakness. In addition, aggressive selling by hedge funds and other large investors -- either to raise needed cash or in response to the demands of clients -- is helping push markets lower.

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