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Markets trapped on wild ride

A ticker shows the NASDAQ down 1 percent August 10.

TEXT OF INTERVIEW

Scott Jagow: The world's stock markets just can't seem to settle down. In Tokyo today, share prices fell more than 2 percent. They're at their lowest level this year. In Europe, bank stocks are still taking a beating, and this is 24 hours after the European Central Bank said things were stabilizing. Our European correspondent Stephen Beard with us for the latest. Stephen, there seems to be no stability whatsoever.

Stephen Beard: Not quite, no I think dealers and traders are not convinced that banks' liquidity problems are over, but now there's an additional worry following yesterday's unusual profit warning from Wal-Mart.

Jagow: Yeah we heard the sort of doom and gloom from Wal-Mart yesterday, but why would that have a big impact in Europe?

Beard: Well it's because of what it says about American consumers. Wal-Mart's boss said customers are increasingly running out of cash and one point that's been picked up in the press here is the revelation that theft from Wal-Mart stores has shot up so much that it's denting profits. The big worry here is that American consumption could turn down. There's a headline in the Times this morning which says it all. It says, "If the Americans stop shopping, then panic."

Jagow: Well Stephen, how much of this is just panic, is people just worried about perceptions at this point?

Beard: I think perceptions and particularly uncertainty is the major part of it, but there are some worrying albeit small signs of difficulty: Industrial output in France, Germany and Italy fell in June. And figures for the second quarter GDP growth for the Eurozone as a whole came out at jut one-third of one percent. All this it seems can be traced back to the same root cause: higher interest rates.

Jagow: All right our correspondent in London, Stephen Beard, thank you.

Beard: OK Scott.

Jagow: Today's sell-off overseas, of course, started with Wall Street yesterday. The Dow fell 207 points to 13,028 — its lowest close since the end of April. The NASDAQ dropped 43 to 2,499. The S&P 500 lost 26. A month ago, the S&P hit a lifetime high. Since then, it's fallen 9 percent.

Doug Krizner: Have these concerns have spread to Asia? Maybe so. Let's bring in Andrew Wood. He covers the Asian market for the Financial Times. First, the worry of the credit markets, what's it like from the Asian perspective?

Andrew Wood: Well globally it is a big worry. The big problem is we don't know exactly how much who's exposed to what. And every time another bank says, 'well we've got a bit of exposure here, we've got a bit of exposure there,' then that certainly say here in Asia is enough to send shares and currencies down as people worry about this exposure.

Krizner: Now yesterday we had Wal-Mart and Home Depot indicating that the future has a lot of questions where the American consumer is concerned. How much could a slowdown in the U.S. economy impact the global economy?

Wood: Well it could impact it a lot in theory, although some economists are saying now that East Asia as an economy is decoupling a little bit from America, so they're not so dependent on trade with the United States. But certainly as far as markets are concerned, if the American consumer is consuming less then that's going to be bad news in the short-term. I mean there was one company today for example, one of the big suppliers to Wal-Mart, it unveiled a 38 percent rise in profits but the shares were down 5 or 6 percent because it's just that the people are so worried that Wal-Mart's consumers, Wal-Mart's shoppers are not going to be buying so much.

Krizner: Andrew Wood is Asian correspondent for the Financial Times in Hong Kong. Andrew, thanks very much for speaking with us.

Wood: That's all right, any time.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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