GLOBAL STOCK MARKET STUMBLES

Global stock markets tumble as U.S. dollar shatters North Korea Times
Saturday 13th May, 2006

Equity markets around the world plummeted Friday as the U.S. dollar went into freefall.
The American currency's near collapse followed several weeks of declines, which has seen the dollar lose 7% of its value against the euro, yen, and the pound, in the last month alone. The dollar index (weighted against a number of currencies) has fallen to its lowest level since October 1997. The relentless selling has failed to cause even the shallowest of corrections.

Friday's announcement by the Trade Department of a 5.6% fall in the trade deficit for April, coming in at $62 billion against analysts expectations of $67 billion, failed to arrest the slide.
The dollar rout has unnerved global stock markets with major falls being recorded in Asia, Europe, and the Americas.

London's FTSE 100 fell 129.90 or 2.15% Friday to 5,912.10. The Paris-based CAC 40 at 5,150.45 was down 112.49 or 2.14%. The German DAX fell 138.44 or 2.29% to 5,916.28. The Amsterdam Exchanges index was off 11.79 or 2.53% at 455.09. In Sweden the OMX Stockholm 30 index fell 29.71 or 2.85% to 1,013.69. The Swiss SMI shed 143.17 or 1.77% to 7,954.10.
In Asia Japan's Nikkei 225 ended the day down 260.36 points or 1.54% at 16,601.78. The Hong Kong Hang Seng fell 238.93 or 1.39% at 16,901.85.

Middle East markets, where the week ends on Thursdays, suffered one of their worst weeks ever. Most Mideast currencies are pegged to the dollar which means the value of stock investments held by foreigners has been plummeting in line with the U.S. currency. The Dubai stock market shed 14.35% for the week, while the Abu Dhabi market gave up 10.49%. Market
analysts fear the stock meltdown may feed into the propery sector which is overblown, particularly in Dubai. Emaar, the emirate's largest property developer lost 22.8%, more than a fifth of its value, over the week.

In the U.S. the Dow Jones industrials fell 119.74 or 1.04% to 11,380.99 Friday, while the S&P 500 declined 14.68 or 1.27% to 1,291.24. The Nasdaq Composite shed 28.92 or 1.27% to 2,243.78. In Canada, the Toronto S&P/TSX Composite lost 127.36 or 1.05% to 12,038.07. The Mexican Bolsa index dropped 280.37 or 1.31% to 21,154.90, while the Brazil Bovespa declined 635.10 or 1.55% to 40,211.97.

The dollar hit a new low of 1.2955 against the euro Friday, while the British pound touched 1.8998. The Swiss franc soared to 1.1965, while the Japanese yen traded as high as 109.32. The commodity currencies were litte changed from Thursday's close but in solid demand. The Canadian dollar reached 1.0991 while the Australian dollar firmed to .7782. The New Zealand
dollar reached a modest high of .6325. The dollar was just shy of its lows for the day the close of trading in New York Friday.

The feverish selling this week has come despite a quarter-point increase in the Fed funds rate to 5%, well ahead of European, Swiss,and Japanese interest rates. The Fed demonstrated an increasing concern over the extent of dollar-selling by signalling its regular monthly interest rate increases may not be over. Markets have been selling the dollar on the basis the Fed will
soon pause, just as other countries are planning to begin a round of interest rate increases.
The U.S., and the G7 in an April communique, expressed concern about the value of the dollar against Asian currencies, particularly the yuan, however the brunt of the selling has been borne by the euro and the Swiss franc.

The Japanese yen which had lagged the majors finally caught up this week. The momentum behind the selling has not waned in recent weeks, with some traders saying the dollar-selling is over-extended, and ripe for a correction.