Regards, Ivan
Posted on 10/09/2002 10:30:53 PM PDT by MadIvan
The German economy went into red alert yesterday as investors again sold out of the stock market, sending the Dax to a fresh six-year low.
The market fell a further 1.64pc, bringing total losses this year to more than 50pc, despite positive manufacturing figures. "Shares are just crumbling," said one trader. The Dax closed 24.21 points lower at 2597.88, having been as low as 2519.30 at one stage.
Each 10pc drop in share prices reduces consumption in Germany by as much as 0.19pc, said Bundesbank president Ernst Welteke. He added that falling markets would "have an effect on the real economy" as consumer confidence was dented.
"There is still no sign of the much hoped for upswing in the economy in the next year," said Professor Wolfgang Franz of the ZEW, or Centre for European Economic Research. "The risks for a renewed downturn have increased".
The fall in the market came despite improved unemployment figures earlier in the week, and a 1.8pc increase in manufacturing output between July and August.
Economists said that those bright spots were overshadowed by European Central Bank chief Wim Duisenburg's assertion on Tuesday that interest rates for the eurozone were "appropriate" at 3.25pc. The ECB is due to decide on interest rates today, and the improbability of a cut is dealing a further blow to confidence in Germany.
"The manufacturing output figures are a lagging indicator, and all the forward looking indicators, such as the Ifo business climate index, continue to show that the economy is fundamentally weak," said Edward Teather, economist at UBS Warburg.
The data did nothing to lift the market with the banking and automotive sectors both performing badly.
In the banking sector, Allianz was hit by the cut in the credit rating for Dresdner Bank by Moody's. Moody's said that the bank suffers from "deteriorated financial fundamentals".
As shares in Deutsche Bank also fell, the chief economist of the ECB, Otmar Issing, advised German banks to take advantage of their low prices to buy back shares. "It would be an exaggeration to talk about a banking crisis but the situation can certainly be called dramatic," he said.
There was some good news for ailing Commerzbank, which gained Eu0.51, nearly 10pc, to Eu5.81 (£3.60). The stock was helped by rumours that the bank's low market value made it a takeover target.
The bank dismissed rumours that its poor health obliged it to present all new credits to the financial watchdog BAFin as "nonsense".
Among the biggest fallers in the car sector were DaimlerChrysler, which lost Eu2.39 to close at Eu30.45, and Volkswagen, which fell Eu2.93 to finish at Eu32.30, its biggest one-day fall since March 2001.
Volkswagen was hit by having to halt production at its main factory for three weeks to prepare to build the new Golf.
"We tend to believe the recovery, if there is one at all, won't take place until the second half of 2003," said one automotive analyst.
Wall Street wobbled again yesterday as analysts issued a raft of profits downgrades.
The Dow Jones lost over 200 points in early trading to 7291.61, as analysts noted that America's most powerful companies are struggling to recover from the economic downturn.
Regards, Ivan
Best Regards, Ivan
Now there's a rosy analysis.
aus
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