Nikkei dives to 26-year low, Dow lost 2.4%

Updated: 2008-10-28

(Chinadaily.com.cn)

Wall Street closed at its lowest levels in 6 years Monday, extending a global stock dumping as jetters about the severity of an imminent world economic contraction, and rising joblessness gripped institutional and private investors. Hedge funds and mutual funds have been dumping stocks to raise cash to meet redemptions from their wealthy clients, traders noted, exacerbating the late-day selling.

Traders work on the floor of the New York Stock Exchange, October 27, 2008. US stocks dropped at the open on Monday, extending a worldwide selloff sparked by more signs of a deep global recession. [Agencies]

The Dow Jones industrial average slid 203.18 points, or 2.42 percent, to 8,175.77, its lowest close since early 2003. The Nasdaq Composite Index was down 46.13 points, or 2.97 percent, at 1,505.90.

Asian markets were pummeled hardest Monday, with Hong Kong shares recording their biggest one-day free fall in more than 10 years, and Tokyo's Nikkei ending at the lowest level in 26 years.

In China, the Shanghai Composite Index dropped 6.32 percent, or 116.27 points, to close at 1723.35 Monday. The Shenzhen index slid 6.89 percent, or 424.14 points, to close at 5734.81. Almost all sectors fell, with nearly 600 stocks dropping by the daily limit of 10 percent.

Trading was volatile and volume was relatively light. Investors were increasingly worried about the impact of the global financial turmoil on the wider economy, analysts said.

"The dive in global stocks last Friday led to investor panic, which was exacerbated by the absence of a stimulus package from the government over the weekend," said Wu Feng, an analyst at TX Investment Consulting in Shanghai.

Despite recent measures to stimulate growth, including interest rate cuts and export tariff rebate increases, the market will not recover in the short term as investor confidence remains weak, said Huang Xuejun, an analyst at Everbright Securities.

In Hong Kong, the blue-chip Hang Seng Index tumbled 1602.54 points, or 12.7 percent, to 11015 - its worst close since May 2004. The benchmark is off more than 50 percent this year.

"Markets are gripped by fear," said Benjamin Collett, head of hedge fund sales trading at Daiwa Securities SMBC Co. "You actually feel sick watching this move."

In Tokyo, the Nikkei 225 index closed down 6.4 percent to 7162.90 - the lowest since October 1982 - with exporters like Toyota Motor Corp and Sony Corp hit hard because of the surging yen.

In New York, shares of energy companies led the decline on bets that a deep global slowdown will sap demand for energy. ConocoPhillips shed 5.8 percent to $45.62 as U.S. crude oil futures slid 93 cents to settle at $63.22 a barrel.

Technology shares also weighed on the broader market, with Microsoft a top drag on Nasdaq after the Wall Street Journal reported that defaults on tech financings -- loans that let companies buy computers, software and other products -- have spiked.

But the stress in global money markets showed some signs of abating. Overnight and three-month dollar-denominated London interbank offered rates eased slightly.

Phone company Verizon Communications' solid profit made it a bright spot for the Dow Jones. Verizon's stock jumped 10.1 percent to $27.61.

Shares of General Motors slid 8.4 percent to $5.45 on the New York Stock Exchange as investors fretted about the carmaker's outlook after people familiar with the talks said that GM and Chrysler owners, Cerberus Capital Management, were discussing a merger.

The U.S. stock market was also looking ahead to the Federal Reserve's interest-rate decision later this week. The Fed is expected to cut lending rates at a two-day policy meeting in response to unprecedented turmoil in financial markets and the threat of a global recession.