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Global markets lurch unsteadily to the end of mad October

Equities in Frankfurt, London, New York and Paris have all plunged by between 15-17 percent since the beginning of October, and Tokyo has erased about one quarter of its value.

“Today is month end, bringing to an end one of the most volatile months for financial markets in recent history,” said Barclays Capital analyst David Woo.

“The concerns about the US economy and the global banking crisis remain.”

Jeffrey Dawkins, Chief Investment Officer at US-based asset managers The FQ Group, added in a note to clients: “October is historically is a good month for the markets. After a month like this, who needs a bad month?”

Global stock markets struggled to recover on Friday, despite continued efforts by policymakers to tackle a credit crunch, with Japan joining an international interest rate-cutting campaign.

Shares fell sharply in Tokyo and Hong Kong, while European markets mainly fell, despite overnight gains on Wall Street as hopes grew that cheaper borrowing costs will nurse the sick global economy back to health.

Japan’s central bank cut its super-low interest rates for the first time in seven years -- by 20 basis points to 0.3 percent -- but investors there seemed unimpressed and the Nikkei index tumbled 5.0 percent.

Hong Kong closed down 2.5 percent as investors locked in recent sharp gains sparked by hopes that the credit crunch was easing.

“The rally is seen to be over,” said Francis Lun, general manager at Fulbright Securities in Hong Kong. “It’s time to take profit.”

In Europe, London fell 1.89 percent and Paris dipped 1.86 percent, while Frankfurt eked out a marginal gain of 0.06 percent near the half-way stage.

In Asia the mood was rather brighter. Seoul rose 2.6 percent, Taipei added almost 4.0 percent and Sydney edged up 0.4 percent.

Indian shares surged 8.22 percent on hopes of a rate cut from India’s central bank.

London investors digested news that British bank Barclays was to raise 11.7 billion dollars (9.3 billion euros), mostly from oil-rich investors in Abu Dhabi and Qatar, to bolster finances amid the global credit crunch.

The new capital means that Barclays will not have to receive funding from the British government, unlike some of its competitors, amid the international financial crisis.

British telecoms operator BT Group saw its share price collapse by more than a quarter after it issued a surprise profits warning, saying that second-quarter earnings would fall short of expectations.

Shares in French cosmetics giant L’Oreal also slumped in response to a sliding third-quarter sales and a profit warning because of the economic downturn.

“Volatility on financial markets remains very high,” BNP Paribas bank strategist Patrick Jacq added in Paris. “Aversion to risk is still very marked.”

This week, central banks from the United States to Asia have lowered borrowing costs as part of concerted efforts to avert a financial system meltdown.

Speculation is growing that the European Central Bank and the Bank of England could follow suit next week with fresh rate cuts.

The fear is that the action may be too late to prevent a global recession. Japan’s central bank said Asia’s largest economy will barely grow this year.

“Following an extremely turbulent few weeks, October is likely to end in a relatively calm manner,” said Mitul Kotecha, head of global foreign exchange strategy at Calyon.

“Volatility in both equity and foreign exchange markets has fallen further but remains at high levels and money market tensions continue to ease gradually.

“Month-end portfolio rebalancing has the potential to spur some volatility in markets today but the overall tone is likely to remain somewhat calmer.

“Whether this continues is debatable and the gradual shift in market attention from credit issues to real economic concerns suggests that market stability and releveraging will be some months away. In the meantime the economic news is set to worsen.”

The mixed performance came after the Dow Jones ended up 2.11 percent on Thursday, despite news that the US economy contracted at a 0.3 percent annualised pace in the third quarter.

The weak economy also continued to squeeze major Japanese companies.

Nissan Motor Co. warned net profits would plunge two-thirds this year, signalling tough times ahead for Japanese automakers which are being hurt by the weak global economy and a stronger yen.

Japan’s top two banks, Mitsubishi UFJ Financial and Mizuho Financial, both slashed their profit forecasts due to the turmoil on world markets.