Global stock markets are continuing to fall as investors worry about how deep the downturn is going to be.

Calling the bottom of the market is a tricky job

The Nikkei in Tokyo is at its lowest level since October 1982 and stock markets seem to be falling throughout the world.

Every so often, there is a day of gains, but these have tended to be wiped out later in the week.

This comes despite trillions of pounds being pledged worldwide to secure the future of the banking system.

Has something new happened to spark the latest falls?

It is hard to point to specific events, but the falls seem to have been linked to attempts to solve the problems not reaping immediate rewards.

The Group of Seven (G7) issued a statement effectively threatening to intervene to weaken the yen, but the yen kept on rising against the dollar.

The Japanese government promised further steps to support share prices, but the shares carried on falling.

Meanwhile, governments around the world have pledged eye-watering amounts of money to get banks lending to each other, but they are still not doing so.

“Every week credit markets remain dysfunctional is doing unknown damage to the macro economy,” said Thomas Lee at JPMorgan.

With the prospect of an approaching global recession, any bad news is knocking several percentage points off stock markets.

What happened to the cheer from the bank rescue packages?

There were indeed big gains on stock markets a few weeks ago as countries seemed to be prepared to work together to solve the banking problems that were at the heart of the credit crunch.

The problem is that despite the rescue, there is a widespread belief that many of the world’s biggest economies are going into recession.

The oil price has fallen, with Brent crude dropping below $60 a barrel, because it is thought that as economies slow there will be less oil used. The same argument goes for copper or coal.

That means that there is likely to be less demand for the products of the big global commodities companies that are particularly well represented on the FTSE 100.

What is going on with currencies at the moment?

There have been wild fluctuations on the currency markets too, with the G7 expressing concern about the volatility of the yen.

Also, the Australian central bank has taken the unusual step of intervening to support its currency twice in a few days.

But it really is the yen that is grabbing the headlines, hitting 13-year peaks against the US dollar and a six-year high against the euro.

The yen has been strengthening as a result of the end of the carry trade, in which traders borrowed the Japanese currency and used it to buy currencies with higher interest rates.

As the difference between Japanese rates and those elsewhere in the world has fallen, traders have been unwinding the carry trade, which means they have been using other currencies to buy yen, which has boosted the Japanese currency.

The strong yen is a particular problem for Japanese exporters, which see their products becoming more expensive for customers overseas, who are already being hit by their own national downturns.

How much further down can the markets go?

Spotting when markets have reached the bottom is a tricky and risky process.

Many traders believe in the idea of capitulation, which broadly means a market surrender.

This is when investors are prepared to get out of the market at any price because they have given up all hope of making money from their shares.

It is often marked by panic-selling and very high volumes of transactions.

The idea is that after capitulation you reach a point at which the last investor who is desperate to get out of shares and move into supposedly less risky assets has sold out.

Once there is a widespread belief that the bottom has been reached, bargain-hunters pile in and the market recovers.

Have we reached the bottom of the market then?

It is really difficult to say.

Some people think we’re nearly there.

The trouble is, some people reckoned we’d reached that point last month.

There were those who declared capitulation had been reached on 15 September when the Dow Jones index fell 504 points in a day.

But since then it has fallen another 2,500 points.

Capitulation is easy to spot in retrospect but the people who recognise it accurately at the time can get very, very rich.

News reported by The BBC

Losses on stock markets have continued after the collapse of fourth largest US investment bank, Lehman Brothers, which has filed for bankruptcy protection.

European markets opened sharply lower for a second day, with the UK’s FTSE 100 and Germany’s Dax both down 1.7%.

Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays.

Lehman, which may be about to sell its core assets to Barclays, is the latest victim of the global credit crunch.

Banks hit

The FTSE 100 of leading UK shares fell 91 points to 5,113 in morning trade. The Dax index of leading German shares was down 106 points at 5,959 points and France’s Cac 40 was down 65 points at 4,104 points.

The US stock market on Monday had its worst day’s trading since 9/11, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51.

Japan’s benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai’s index fell by about 3%.

Chinese share prices closed 4.47% lower as the fallout from Lehman Brothers outweighed Beijing’s first interest rate cut in years, announced on Monday.

The benchmark Shanghai Composite Index, which covers both A and B shares, was down 93.04 points at 1,986.64 after touching a low of 1,974.39.

Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.

Bank stocks were hard hit again across Europe; in London HBOS was down about 12%, and Royal Bank of Scotland was down more than 7%.

Barclays Bank – which today said it was in talks to take on some of Lehman’s US operations – was one of the big fallers, down more than 5%.

In Paris, Credit Agricole, Societe Generale, and BNP Paribas were all down by nearly 4%, while in Germany Commerzbank dropped 8.6% and Deutsche Bank fell 3.7%.

‘Crisis’

Central banks in Asia attempted to calm markets after similar steps on Monday by their US and European counterparts.

“Big banks can no longer be under any illusion that they can make big, stupid financial bets and expect taxpayers to pick up the bill” Robert Peston, BBC business editor

Q&A: Lehman collapse

The Bank of Japan injected 2.5 trillion yen ($24bn; £13bn) into the banking system. Australia and India also pumped cash into their money markets.

The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, threatens to deal further blows to other financial institutions, as they unwind deals with the former investment giant.

“We’re in the middle of a crisis,” said YK Chan at Phillip Asset Management in Hong Kong.

Meanwhile, there were fears AIG, once the world’s largest insurers, could also face collapse.

The State of New York has announced a “multi-billion dollar financing plan” to stabilise the insurer’s finances.

Central banks in Europe and the US have also moved to reassure markets.

The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of $39bn into the financial system.

‘Rough spots’ ahead

US Treasury Secretary Henry Paulson said the US was “working through a difficult period in our financial markets right now as we work off some of the past excesses”.

Henry Paulson was upbeat despite the turmoil

He said Americans could remain confident in the “soundness and resilience” of the US financial system.

But he warned that uncertainty remained and it was likely that there would be further “rough spots” ahead until the correction of the US housing market was completed.

Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps “to maintain the stability and orderliness of our financial markets”.

But he gave no details of what such steps might mean.

On Monday President George W Bush said: “In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments.”

News reported by The BBC

Stock markets have rallied strongly in the US and Europe on the back of the continuing fall in the price of oil.

Oil prices touched three-month lows of $118 a barrel, nearly $30 below their recent peak, amid signs of rising supplies and slowing demand.

The news, allied to the Federal Reserve’s decision to keep interest rates on hold, sent the benchmark Dow Jones index up nearly 3% to 11,615.77.

Markets also put on strong gains in London, Paris and Frankfurt.

Buoyant markets

The FTSE 100 index closed up 2.5% while Germany’s Dax and France’s Cac indices rose 2.6% and 2.4% respectively.

The spike in oil prices in the early part of the summer, which saw the cost of a barrel of oil hit nearly $150, depressed many stock markets.

But the situation has now reversed with US crude settling down $2.24 at $119.13 on Tuesday while Brent crude fell by $2.98 to settle at $117.70.

This prompted the best day’s trading on the Dow Jones in four months.

Oil prices have fallen in the past couple of days after it seemed that storms in the Gulf of Mexico were unlikely to lower output.

But analysts have also said that slowing economic growth is set to cut demand for commodities in general.

Announcing its decision to keep interest rates on hold on Tuesday, the Federal Reserve said economic growth was likely to remain weak for the rest of the year and beyond.

At the same time, it said economic activity improved in the second quarter and it believed inflationary pressures would ease in 2009.

Analysts said that many investors were now focusing more on the potential imbalances between supply and demand on the oil market, and were looking at moving cash from oil and into other assets.

“Most of the hedge funds have been taking profits,” said Angus McPhail of British-based investment firm Alliance Trust.

He added that prices could fall to “about $100 within the next month if you keep on getting weak demand data”.

News reported by The BBC

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.

News reported by BBC