http://www.guardian.co.uk/business/2008/oct/10/marketturmoil-creditcrunch
Financial crisis: Panic selling piles sees FTSE down nearly 10%
# Graeme Wearden and Julia Kollewe
# guardian.co.uk,
# Friday October 10 2008 14.00 BST
A wave of panic selling wiped more than £100bn ($170 billion dollars) off the value of Britain's biggest companies today, as recession fears sent stockmarkets worldwide tumbling.
Dealers in the City dumped shares when trading began this morning, sending the FTSE 100 plunging by more than 10% in early trading. The index fell by 438.8 points, careering down through the 4000 mark for the first time in five years.
Markets across Europe were also in freefall, following yet another rout in Asia, piling pressure on world leaders as they meet in Washington for the G7 summit to consider joint action to contain the financial turmoil.
The CBI warned that any signs of disarray at the G7 meeting could have a devastating effect on the markets.
"Never has a meeting of the G7 been so important to the financial markets," said the CBI's deputy director-general, John Cridland. "This meeting has the power to galvanise sentiment and aid the confidence-building process internationally."
The markets clawed back some losses as the morning progressed, but there was little sign of confidence returning. By 2pm the FTSE 100 has lurched down to 3918.8, off 958 points or more than 9%, putting it on track for one of its biggest ever losses. Banks and miners led the fallers, along with blue-chip firms such as British Airways, BT and Thomson Reuters, as the pound hit a five year low against the dollar.
"It's official. It's a bloodbath - just pure blind panic! Valuations go out the window, sentiment rules OK," commented David Buik, veteran City commentator at BGC Partners.
Shares on Wall Street are also expected to plummet later today, with the Dow Jones industrial average tipped to drop by almost 300 points, or 3.3%. Yesterday, in a further sign that the wider economy was being pulled into the crisis, shares in General Motors and Ford plunged on Wall Street over fears that the troubled automotive industry may not survive the downturn.
The stockmarket turmoil shows confidence has not been restored despite America's $700bn (£380bn) bail-out, Britain's £500bn banking rescue plan and the coordinated interest rate cuts by the world's central banks.
The latest Libor figures, released before noon, showed that banks were still very reluctant to lend to each other.
It's clearly a crash
Investment guru Jim Rogers today criticised the political response to the crisis, warning that attempts to rescue "incompetent" banks would simply drive up debt and inflation.
"Markets are collapsing because they have no confidence in the various government plans," said Rogers, who said the markets were "very clearly experiencing a crash".
Martin Slaney, the head of derivatives at financial spread betting company GFT, said markets were suffering "vicious sell-offs".
"What we are witnessing is mass selling on a global scale due to a combination of sheer panic and fear, combined with complete uncertainty over the future of the world's major economies," Slaney said. "Investors are effectively pricing in the possibility of a global depression."
President George Bush is due to speak later today on the state of the economy, after watching the Dow Jones industrial average suffer its third-worst points fall ever, hitting a five-year low.
Japan's Nikkei index has now fallen by more than 24% in the past week. It closed down 9.6% earlier today, its biggest one-day fall since 1987, at 8,276, while Hong Kong's Hang Seng index was nearly 8% lower at 14,672.
The price of a barrel of oil also tumbled overnight, with traders anticipating lower demand as several economies lurch towards recession.
US light crude for November delivery dropped $4.19 a barrel to $82.40, taking its losses over the past two weeks to 23% — the biggest two-week sell-off since prices fell at the start of the 2003 war in Iraq.
London Brent crude slid $3.58 to $79.08 a barrel, falling below $80 for the first time in a year.
Gold prices jumped to the highest in two months as investors scrambled for safety. Spot gold rose for the fifth day in a row and hit $925.05, the highest since July 31.
"Investors only concentrate on gold. Stock prices and other commodities are not so good," said Yukuji Sonoda, a precious metals analyst at Daiichi Commodities in Tokyo.
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