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Traders are worried about oil prices and the health of the US economy
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Global stock markets have suffered a sell-off sparked by concerns about the global economy and crude oil prices which have hit a new record.
New York’s Dow Jones closed down 0.93%, or 106.9 points, at 11,346.51 as the cost of oil rose to a fresh high above $142 a barrel.
Losses were mirrored across the Atlantic, as share indexes in Paris and Frankfurt ended about 0.6% lower.
But London’s FTSE shrugged off earlier losses to register a 0.2% rise.
Stock markets across Asia fell - earlier China’s benchmark Shanghai index dropped by 5.3%, while India’s Sensex index declined by 4.3%.
Indexes in Japan, Taiwan and South Korea all shed more than 2%.
Crude oil surged to a record, as Brent crude jumped to $142.13 a barrel, while New York light crude climbed as high as $142.26, on concerns about supply.
The global stock market downturn began in New York on Thursday, when the Dow fell more than 3% to a two-year low.
The fear on Wall Street is that rising prices and tighter finances will force Americans to curb spending and push the economy into recession.
Consumer concerns
Traders brushed aside positive news about US consumers on Friday.
The US economic stimulus package, which will hand out $107bn to Americans this year, boosted household budgets and helped consumer spending rise 0.8% last month.
But analysts are not convinced May’s feelgood factor will last.
“We have had very strong consumer spending, but most of the tax rebates went into savings, which might mean they are going to stay there,” said Pierre Ellis, an economist at Decision Economics in NewYork.
Investors also reacted to a string of bad news about key sectors of the US economy, while worries remain about the credit crunch and sub-prime fallout.
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I say if the US EPA would simply enforce their own mandate “to protect the environment from pollution, etc., and immediately call all motor vehicles in for emissions tests - millions of cars, trucks, and SUVs would be off the road over night until they could finally re-test and pass the emissions standard. This would relieve both the supply and demand sides of the gasoline crunch; driving up the supply and driving down the demand. This simple solution would make the price drop significantly and quickly.
I would also recommend that the government then offer those who cannot pass the current standard for emissions a tax break and a voucher for a down payment on a newer, more gas efficient car or truck that also passes the emissions standard while it reduces demand and increases supply here in the USA.