Global stocks and US futures plunge on credit concern

Dubai: Stocks tumbled worldwide for the fifth day, US index futures plunged and government bonds rallied after the UK's $87 billion bank bailout plan failed to restore confidence in the financial system.

Japan's Nikkei-225 Stock Average fell 9.4 per cent, the third-biggest decline on record, and all but one of the companies in the UK's FTSE 100 Index dropped. Russia and Indonesia halted stock trading after benchmark indexes plummeted more than 10 per cent. Futures on the Standard & Poor's 500 Index slumped more than 30 points, while yields on two-year Treasury notes declined 8 basis points to 1.38 per cent.

"Investors are capitulating," said Oumkaltoum Al Ouarti, a fund manager at KBL Richelieu Gestion, which has $6.2 billion in Paris. "There's a crisis of confidence. We need to see action on a global scale."

The yen strengthened as traders retreated from higher-yielding investments funded in Japan, bringing its gain against the euro to 6.2 per cent this week. Commodities fell, led by a 5.2 per cent drop in copper traded on the London Metal Exchange, on concern that the freeze in global credit markets will stifle economic growth.

The MSCI World Index of 23 developed markets lost 2.9 per cent to 1,009.21 at 9:31am in London, bringing its five-day drop to 15 per cent, the steepest on a closing basis since October 1987.

Europe's Dow Jones Stoxx 600 Index declined 5.7 per cent as Barclays Plc fell 12 per cent and Royal Bank of Scotland Group Plc slumped 3.1 per cent. S&P 500 futures lost 3.1 per cent as Alcoa Inc. retreated 4.4 per cent. The MSCI Asia Pacific Index fell 7.4 per cent, with Mitsubishi UFJ Financial Group Inc. tumbling. The MSCI Emerging Markets Index declined 7.6 per cent.

The S&P 500 fell below 1,000 for the first time since 2003 on Wednesday, while the S&P 500 Financials Index slumped 12 percent to its lowest level since 1997 even as Federal Reserve Chairman Ben S. Bernanke signaled he is ready to cut interest rates.

"As we've seen in the US, government intervention isn't freeing up credit markets and at the end of the day that is the key point," Matthew Buckland, a dealer at CMC Markets in London, wrote in a note to clients. "If it's difficult for companies and individuals to get hold of credit, it's going to be difficult to stimulate growth and break out of this recessionary mindset."

UK Prime Minister Gordon Brown's government will invest about 50 billion pounds ($87 billion) in an unprecedented step to prevent a collapse of the U.K. banking system.

As part of the plan, the government will buy preference shares, and the Bank of England will make at least 200 billion pounds available for banks to borrow under the so-called special liquidity plan, the Treasury said in a statement today. The government will also provide a guarantee of about 250 billion pounds to help refinance debt.

Cutting forecast

Barclays retreated 12 per cent to 251.5 pence, and RBS dropped 3.1 percent to 87.2 pence.
The world's major banks may need $675 billion in fresh capital over the next several years to recover from a credit crisis that shows few signs of abating, the International Monetary Fund said yesterday.
The Washington-based IMF raised its estimate of losses tied to U.S. loans and securitized assets to $1.4 trillion from $1.3 trillion two weeks ago. The IMF cut its forecast for global growth next year to 3 percent from an April prediction of 3.7 percent, according to the draft of its latest World Economic Outlook.
Bank of America Corp. lost 6.4 percent in German trading after the second-biggest U.S. lender by market value sold shares for an 8 percent discount, heightening concern that investors are reluctant to provide new capital to banks.
Today is the last day of a U.S. Securities and Exchange Commission rule banning short sales in more than 980 financial companies. Since it was announced Sept. 18, companies covered by the rule are down an average of 16 percent, according to data compiled by Bloomberg.

Commodities fall

Alcoa, the largest US aluminum producer, fell 4.4 per cent to $15.98 in Germany after third-quarter profit trailed analyst estimates and the company suspended a share-repurchase program because of the worsening credit crisis.
BHP Billiton Ltd., the world's largest mining company, dropped 8.2 percent to 997.5 pence. Rio Tinto Group, the third- largest, declined 7.4 percent to 2,702 pence. Copper, the metal used in wires and pipes, dropped 6.2 percent to $5,345 earlier, the lowest intra-day level since February 2007.
BP, Europe's second-biggest oil company, fell 5.7 percent to 422 pence. Total SA sank 5.9 percent to 37.67 euros.
Oil dropped in New York on concern consumption will weaken in the U.S. and other developed nations.
The Stoxx 600, which has lost 34 percent this year, was valued at 10 times the reported earnings of companies in the index yesterday, the cheapest since Bloomberg began compiling the data in January 2002. The MSCI World Index was valued at 12.4 times profit yesterday, the cheapest since at least 1995, while the Standard & Poor's 500 Index traded for 19 times earnings.
The yen surged above 100 per dollar for the first time in six months after a plunge in stocks prompted investors to unwind carry trades, where they get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Benchmark rates are 0.5 percent in Japan.