World Stocks Down Again; US Retail Sales Drop
Stock prices were down again Wednesday, on Wall Street and in Europe and Asia. Investors seem to doubt that plans to help troubled financial institutions will be enough to fight off a deep recession.
Wall Street followed Europe and most Asian exchanges in losing ground on Wednesday. In New York, the Dow Jones Industrial Average was down more than 300 points, or three percent, early in the day. London's FTSE 100 index, the DAX in Frankfurt and the CAC 40 in Paris were all down more than five percent in afternoon trading.
In Tokyo, the Nikkei index gained 100 points, or more than one percent, but Hong Kong's Hang Seng dropped almost five percent (835 points).
A report that U.S. retail sales plunged in September accented global concerns that the United States is either moving toward a recession or already in one. The Commerce Department said Wednesday retail sales dropped by 1.2 percent last month. It was the biggest decline in three years, and almost double what experts were expecting. Consumer spending is two-thirds of the total U.S. economic activity.
Another report showed that U.S. wholesale prices dropped for the second straight month, led by retreating energy costs. But aside from energy and food, all other wholesale prices had their biggest annual increase in more than 17 years.
U.S. President George Bush says he believes the nation's economy will rebound. As the president met with his Cabinet Wednesday to discuss the financial crisis, he said his administration has taken bold actions to strengthen financial institutions.
"These are extraordinary measures, no question about it," he said. "But they are well thought out, they are necessary and I am confident in the long run this economy will come back."
On Tuesday, Mr. Bush announced plans for the government to buy $250 billion in stock in private banks, in hopes of getting credit flowing again.
Meanwhile, the European Union is holding a summit in Brussels, focused on the financial crisis. EU officials want to increase the amount of money protected by insurance, among other initiatives. British Prime Minister Gordon Brown says the world's financial institutions need major changes.
"To build confidence about the future, which is essential for every saver and every depositor and every business, we have to show that we are dealing with the problems that caused the events of the last few months in the first place," he said.
In other business news, U.S. antitrust regulators have approved Bank of America's $35 billion purchase of Merrill Lynch. The deal combines the largest U.S. bank by deposits with the world's largest brokerage. The acquisition must still be approved by the U.S. central bank, the Federal Reserve.
Also, J.P. Morgan Chase's profit plunged by 84 percent in the third quarter, due largely to bad mortgage investments, leveraged loans and home loans. Still, profits at the New York-based bank were higher than expected.
And one big U.S.-based company has some good news. Coca-Cola reports its third-quarter profits were up 14 percent. Sales in emerging markets offset weakness in North America.