OK, I'll start the script.
FIRST YORKSHIREMAN:
Aye, very passable, that, very passable bit of risotto.
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U.S. subprime fears spark renewed slide in global stocks
canada.com
Lincoln Feast, Reuters
Published: Wednesday, March 14, 2007
By Lincoln Feast
LONDON (Reuters) - Global stocks tumbled on Wednesday on fears of financial contagion spreading from troubled U.S. subprime lenders, while safe-haven government bonds and the yen firmed as risk appetite faded.
The sharp retreat echoed the slide in equity markets two weeks ago but moves in currency and emerging markets were more muted on the latest concerns about the subprime market, which deals in loans to people with poor credit histories.
A pedestrian is reflected on a stock index board in Tokyo March 14, 2007. REUTERS/Kim Kyung-Hoon
By 0848 GMT, the pan-European FTSEurofirst 300 index <.FTEU3> was down 25 points or 1.7 percent at 1,440 points, within striking distance of year's lowest level of 1,428.2 points hit earlier this month.
"This seems to be the second leg of the global fall in equities and there is very little impetus to jump in and buy," said one trader. "It's time to fasten seat belts."
Volatility spiked, with Germany's DAX new volatility index <.V1XI> surging more than 11 percent to a fresh year high of 23.17 percent.
Asian stocks also crumbled after a 2 percent fall on Wall Street overnight, which was rattled by weaker-than-expected U.S. retail sales and falling financial stocks.
Tokyo's Nikkei <.N225> fell 2.9 percent, its second biggest daily percentage fall this year, pulled down by the U.S. fall and strength in the yen as currency traders unwound carry trades where they borrowed the low-yielding yen to buy riskier assets.
MSCI's index of Asian stocks excluding Japan <.MSCIAPJ> fell 2.6 percent.
"If the U.S. subprime mortgage problems get worse, it could begin to hurt U.S. consumers, and that would be very hurtful for exporters," said Kim Yung-min, a fund manager at SH Asset Management in Seoul. "This month could be very bad."
YEN GAINS AS CARRY UNWINDS
In currency markets, the yen retained a firm bias as investors cut back their carry trades.
"In this environment the market is likely to tread very cautiously," said Kamal Sharma, currency strategist at Bank of America.
"With a renewed bout of risk aversion the likes of the yen and Swiss franc are likely to be in the ascendancy for the time being."
The dollar was down 0.2 percent at 116.05 yen while the euro was also 0.2 percent weaker at 153.10 yen. Higher yielding sterling was off 0.5 percent at 223.15 yen.
Government bonds rallied as stocks fell and risk appetite faded.
"People are flapping about the subprime market but it was not helped by Countrywide Financial, one of the biggest quality lenders above subprime status, saying we have a credit crunch," said a bond trader in London.
The June Bund future was up 23 ticks at 116.51.
The two-year cash yield was down 1.2 basis points at 3.887 percent and the benchmark 10-year yield was down 0.7 basis points at 3.88 percent, having fallen to a new low for the year of 3.87 percent.
Corporate debt markets reacted to the slide in equities but moves were largely contained.
The iTraxx Crossover index, a key marker of sentiment for riskier credit in Europe, widening 10 basis points to 238 basis points above government bonds. The index has widened almost 40 basis points in the past two days.
Spreads of emerging market government bonds over U.S. Treasuries widened two basis points to 190 basis points, following a seven point widening in New York on Tuesday.
Commodity prices were mostly lower, with gold down around 1 percent to a one-week low and copper under pressure.
U.S. light crude oil rebounded above $58 a barrel after a sharp fall the previous session and ahead of data expected to show a fall in U.S. fuel inventories. |
