American stocks bounce back
(02 March 2007)
US stocks bounced back yesterday after tumbling on Tuesday in the wake of a plunge in Chinese shares that saw their value plummet to their lowest level in a decade, prompting a global slump.
New York's Dow Jones industrial average closed at a modest 0.4 per cent, after recording its worst slide since the September 11th 2001 terrorist attacks, on Wednesday.
But despite American investors being heartened by reassurances over the health of the economy from US Federal Reserve chairman Ben Bernanke, the optimism was not shared in the Asian markets where Tokyo's Nikkei index fell 1.5 per cent in morning trade and Shanghai's main index fell by 1.7 per cent by midday local time.
European markets also continued to fall, with London's FTSE 100 closing down 114.6 points, or 1.8 per cent, at 6,171.5; although there were signs of recovery on early morning trade today.
The global slump in shares appears to have been prompted by investor fears that the Chinese authorities may attempt to curb the country's burgeoning economy by increasing interest rates and taking other tough measures.
Chinese stocks plunged by almost nine per cent on Tuesday amid rumours that the government was planning to tax stock gains.
However, investors will also be keeping a close eye on the performance of the US economy, the world's largest, in order to ascertain the outlook for the wider global economy.
Speaking before a Congressional committee yesterday, Federal Reserve chairman Mr Bernanke suggested that there didn't appear to be "any single trigger" for the current rout in the financial markets and stressed that there was a "reasonable possibility" that the US economy would show signs of strengthening by the middle of the year.
However, figures released yesterday by the US commerce department suggested that the economy has grown more slowly than the expected rate of 2.2 per cent during the past three months, while other data showed the sharpest drop in new house building in America since 1991, leading to fears about the state of the housing market there.
