GERMANY: DAX DOWN 7%
January 21st, 2008It’s a global sell off, but Germany is down over 7% at the moment, according to the blinking numbers on my screen…
You might recall that I focussed specifically on Germany in my New Year’s piece about 2008:
Think of the longer term effects on European economies of the dollar collapse and Americans becoming unable to purchase goods from Europe. Germany is the most vulnerable. The U.S. is Germany’s second-largest trading partner and the U.S. runs huge bilateral trade deficits with Germany. (See: U.S. State Department.)
The largest German firms have expertly used hedging strategies in the Forex markets to mitigate the effects of dollar declines in the past. Smaller exporters, though, could be facing a very hard year. The U.S. and Germany have tied ropes around each other. If the U.S. slips off the cliff, Germany will go with it.
Now, I could have written a similar analysis about lots of other countries and their relationship to the U.S. (New Zealand, in particular), but Germany is the economic powerhouse in Europe. This is a key bilateral relationship to watch.
Via: AP / Yahoo:
Asian and European stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government’s stimulus plan to prevent a recession.
India’s benchmark stock index tumbled 7.4 percent, while Hong Kong’s blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.
Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy, which has been battered by housing and credit problems. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.
Concerns about the outlook for the U.S. economy, a major export market for Asian companies, has sent the region’s markets sliding in 2008. Just last Wednesday, the Hang Seng index sank 5.4 percent.
“It’s another horrible day,” said Francis Lun, a general manager at Fulbright Securities in Hong Kong. “Today it’s because of disappointment that the U.S. stimulus (package) is too little, too late and investors feel it won’t help the economy recover.”
Japan’s benchmark Nikkei 225 index slid 3.9 percent to 13,325.94 points, its lowest close in more than 2 years. China’s Shanghai Composite index plunged 5.1 percent.
The sell-off continued in Europe. Germany’s DAX was down 4.2 percent in morning trading, France’s CAC 40 slid 4.7 percent, while Britain’s FTSE 100 dropped 3.6 percent.
