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Just when you think things can't possibly get any worse in the stock market, things get really nasty. On Friday, stock market indexes around the world – already suffering massive losses over the past several weeks – crumpled amid speculation that the credit crisis is about to get a whole lot worse.
U.S. stock index futures were down sharply with about an hour before markets open, suggesting that stocks will fall at the start of trading. Futures for the Dow Jones industrial average fell 186 points, to 8412. Futures for the broader S&P 500 fell 18 points, to 894.
But the real damage was overseas. In Europe, the U.K.'s FTSE 100 fell 7.2 per cent and Germany's DAX index fell 8.8 per cent in afternoon trading. In Asia, Japan's Nikkei 225 fell 9.6 per cent in overnight trading.
Meanwhile, commodities were also off. Crude oil fell 6.3 per cent, to $81.13 (U.S.) a barrel in New York – a bad sign for Canadian energy producers.
What has put investors in such a foul mood? You can't blame General Electric Co., whose third quarter earnings, released on Friday morning, matched expectations from analysts. Yet, the shares fell to $18.35 in pre-market activity.
More likely, investors are reacting to the fact that the co-ordinated rate cuts from central banks this week have done nothing to alleviate the steep cost of borrowing dollars, which is keeping credit markets seized up. According to Bloomberg News, the London interbank offered rate – or Libor, the rate that banks charge one another – rose again on Friday.
The only good news for Canadian investors came in the form of a stunning employment report from Statistics Canada – which is likely to be ignored by a market that is clearly obsessed with other issues. Statscan reported that employers added nearly 107,000 part-time and full-time workers to their payrolls in September, far above the forecast for 10,000 additions. The employment rate held steady at 6.1 per cent, as more people entered the workforce.
“It seems like everyone has a paper route these days,” said Avery Shenfeld, senior economist at CIBC World Markets, in a note.
In other news, Ottawa said it would help ease borrowing costs by buying up to $25-billion worth of mortgages currently held by Canadian banks.
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