PARIS ? European stock markets fell steeply again on Wednesday
after the head of the European Central Bank dampened investors? hopes that the bank would follow the Federal Reserve in cutting interest rates.
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Investors monitored stock quotes Tuesday at a securities firm in Hong Kong. The benchmark Hang Seng index, which fell 8.65 percent, was down some 10,000 points from its October high.
Global stocks
remained highly volatile a day after the Federal Reserve?s emergency interest rate cut on Tuesday. Asian shares gained sharply after a two-day mauling, and many European markets opened with modest gains, in part on hopes for a rate cut in Europe. But the chief European central banker, Jean-Claude Trichet, indicated in Brussels that no monetary easing was in the cards.
?In demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility in already highly volatile markets,? Mr. Trichet told the European parliament, according to Reuters.
Mr. Trichet?s remarks, combined with signals from the Bank of England, the Bank of Japan and others that they intended to hold rates steady, sent major European indexes sharply lower, and overnight trading in American index futures signaled that Wall Street would open lower as well.
In mid-afternoon trading, the CAC 40 in Paris was down more than 4 percent, the DAX 30 in Frankfurt 3.2 percent and the FTSE 100 in London nearly 2 percent.
Eric Chaney chief economist for Europe at Morgan Stanley in London, said the market was ?impatient? for a European rate cut, but that Mr. Trichet?s
comments were not quite as hawkish as some seemed to think.
?The E.C.B. had a tightening bias previously,? Mr. Chaney said, but ?Trichet left open the possibility of a move toward a neutral bias.?
Even so, he said, European investors were unlikely to get any short-term relief from the bank, as ?news from the real economy in Europe is very good,? and ? we would have to see some bad news from the real economy rather than the markets,? before policy makers cut rates there.
Some traders questioned whether the Fed itself had overreacted.
?The Fed rate cut was both bigger and earlier than people expected,? said Manuel Martin, an equity strategist at WGZ Bank in Frankfurt. ?Now people are starting to ask, ?Is the U.S. economy really that bad off?? ?
The strong rises on Asian indexes Wednesday reflected buying by speculators to cover short positions, and a sense that shares in the region had fallen more than was
justified. Hong Kong?s Hang Seng index, which experienced the biggest drops in Asia this month, led the region?s rebound, soaring 11 percent on Wednesday after the central bank there matched the Fed?s rate cut ? an expected move, since the Hong Kong dollar is pegged to the United States dollar.
In China, the CSI 300 index rose 4.7 percent; in Japan, the Nikkei 225 gained 2 percent; in India, the Sensex, another of the biggest losers in the past two days, closed 5.6 percent higher on Wednesday. The Australian stock markets halted a 12-day losing streak.
But the gains on Asian markets were not big enough to erase the losses suffered there in recent days, as worries about the possibility of a crippling recession in the United States swept the globe.
?The system which supported the U.S. credit markets has collapsed,? said Yuuki Sakurai, director and general manager of the financial and investment planning department at Fukoku Mutual Life
Insurance in Tokyo. ?Merely easing rates will not solve the root problem,? which was that the problems in the mortgage market had upset ?standard measures of investment.?
Larry Jones, chief investment officer at Nedgroup Investments, said, ?The basic U.S. economic problems are not over, and a lot of them are ahead of us.?
The recent nosedive in Asian markets shows that even if the fast-growing economies of Asia are able to avoid a slowdown from the problems in the United States, the region?s high-flying stock markets will not, he said.
Central banks in Asia faced the question of whether to follow America?s lead on interest rates or Europe?s.
?You have to stay in tune with the developments with the rest of the world,? the Asian Development Bank managing director, General Rajat Nag, told Reuters on Wednesday. ?However, I think central banks in the region have to keep an eye on the inflation front as well,? he added.
Australia?s treasurer, Wayne Swan, said he welcomed the Fed?s move, while predicting that the domestic economy would remain strong despite any U.S. slowdown.
?It?s pretty fair to say that Australians can be confident that the prospects for growth in Asia and developing regions will help us withstand the fallout from the events in the United States and elsewhere,? he said.
Fred Zhang, a stock broker at Mansion House Securities in Hong Kong, said that Hong Kong investors were particularly encouraged by the Federal Reserve?s interest rate cut because of the correlation between currencies. Mr. Zhang said that while many investors were still worried, he was optimistic about the short-term prospects for the Hong Kong market.
?I think it will keep going upward,? he said.
After days of losses, ?Asian markets were looking for a reason to move back? to prices that represent the fundamental numbers underlying them, said Subir
Gokarn, Standard & Poor?s chief economist in Asia. Now investors need to overlook ?the panic and the froth, and see what the reality is,? he said.
On Wall Street, shares of Apple fell more than 11 percent in pre-market trading after a disappointing earnings report late Tuesday.