World Financial Crisis

Market panic continues ahead of G7 crisis talks

Article published on the 2008-10-10 Latest update 2008-10-10 14:03 TU

A trader on the floor of the New York Stock Exchange
(Photo: Reuters)

Worries over the state of the world’s financial system are sending markets into a freefall. London and Frankfurt plunged more than ten per cent and Paris more than nine per cent on Friday morning despite interest rate cuts and billions of dollars' worth of cash injections by central banks this week.

Japan's Nikkei stock index plunged 9.6 percent by the close of trading on Friday, the biggest loss since "Black Monday", Tokyo’s October 1987 crash. The global financial crisis has claimed its first Japanese institution as Yamato Life Insurance declared bankruptcy Friday morning.

Sydney plunged 8.3 per cent, Singapore fell 6 per cent and in Hong Kong, share prices dropped 7 per cent.

Russia's financial regulator ordered the country's two main stock markets to stay closed Friday after sharp falls in the United States and Asia, news agencies reported.

US shares plunged to five-year lows yesterday with the Dow Jones dropping 7.3 per cent. The Nasdaq fell 5.5 per cent and Standard & Poor's 500 index slumped by 7.6 per cent.

Share prices fell sharply late in the day Thursday in Europe despite a decision by the European Central Bank to offer unlimited cash injections for institutions in crisis.

Singapore has become the first Asian country to enter a recession, after declining for a second straight quarter, analysts said Friday. Singapore is southeast Asia's wealthiest economy in terms of gross domestic product but is heavily dependent on trade.

Japan’s Prime Minister Taro Aso, chair of the Group of Eight rich countries, said Friday he would call an emergency G8 summit if finance chiefs meeting in Washington do not reach an agreement on the global financial crisis. "If things cannot be concluded, as the chair, we will call one", Aso told reporters.

Japan this year chairs the G8, which includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.

Finance ministers and central bank chiefs from the G7, the G8 club without Russia, are set to meet in Washington later Friday.

Japanese media report that Japan will urge the G7 to create an emergency lending programme to help smaller countries deal with the world financial crisis. Japanese Finance Minister Shoichi Nakagawa said in Washington, "Japan is determined to cooperate for measures including providing capital", Jiji press reported.

A G20 meeting of financial leaders of other major economies including Russia, China and India, is also due to take place.

The head of the International Monetary Fund, Dominique Strauss-Kahn, called for European countries to work together to deal with the crisis. Unilateral action "has to be avoided, if not condemned," he said Thursday.