"Today it’s because of disappointment that the US stimulus package [announced Friday] is too little, too late," said Francis Lun at Fulbright Securities to the Associated Press overnight.
President Bush’s $140 billion package of tax rebates and business incentives could be worth 1% of the United States’ annual GDP. But "investors feel it won’t help the economy recover," according to Lun, and it certainly wasn’t enough to prevent today becoming a very Black Monday for equity holders the world over.
The Sensex in Mumbai – where Indian gold buyers have lately begun turning to stock-market investments – lost more than 9% of its value as $190bn of investors’ cash was locked out of the market, awaiting allocation in Reliance Power’s initial share offering.
"Everyone who wants to buy stocks today, his money is in the Reliance IPO," said Dharmesh Mehta at Enam Securities in Mumbai to the Financial Times earlier. "The market can only bounce back once that money returns in two weeks’ time."
Over in Tokyo, meantime, the Nikkei index dropped 3.8% to a new 27-month low while the Japanese Yen reached a three-year high on the currency markets.
"The prospects for a sustained sell-off of the Yen in the current financial market climate of uncertainty remain very slim," says Derek Halpenny at Bank of Tokyo Mitsubishi UFJ.
On the data front, input-price inflation in Germany last month matched Nov.’s 2.5% rate, according to DeStatis.de, while in the UK government borrowing outpaced analyst forecasts by one-tenth.
New data today also said the broad M4 measure of the UK’s money supply grew by 12.3% in Dec., a three-month record. Yet the Bank of England is now widely expected to cut UK interest rates when it next meets in two weeks’ time.
The British Pound – already 8% down on its trade-weighted index from the start of last year – this morning dropped more than a cent to reach a nine-month low vs. the Dollar below $1.9500. The Gold Price in Sterling held above £448 per ounce, higher by more than one-third from this time in 2007.
"The UK consumer is buckling under the combined effects of rising food and energy bills, increasing credit costs, flat wages and negative wealth effects from housing and equity markets," reckons Daragh Maher at Calyon Bank.
But it’s not only UK consumers suffering strong and sustained growth in the cost of living.
Indra Nooyi, joint chairman and CEO of PespiCo – one of the world’s largest food companies – today told The Times of London that "structural inflation for food is here to stay for another two to three years."
The latest drop in world stock markets, however, has forced yet more money into government bonds, pushing yields still further below the current rate of inflation but increasing the pressure on central bankers to cut their target interest rates.