A chaotic day in Frankfurt
Elizabeth Press · 23 Jan 2008, 17:43
Published: 23 Jan 2008 17:43 GMT+01:00
After the Dax’s initial 6 percent drop, the index levelled off to about minus 4.8 percent. Both the MDAX, an index of 50 German companies who are a class smaller than the Dax 30, lost 3 percent.
The Fed's emergency cut of 75 basis points that brought the Fed funds rate to 3.5 percent in order to calm the mass panic on the world's bourses has had a fading effect in Frankfurt, where the markets had a volatile opening and a disappointing closing. Even substantial gains in the Asian stock markets boosted European stocks, but not enough to put the Dax on positive ground.
The cause for further losses in Frankfurt is fears over a US recession and an initial 2 percent loss on the Dow Jones Industrial Average. Even the Dow Jone's later recovery of this loss was not enough to quell fears in Frankfurt.
"The clear boost during the morning was amazing," Marko Pillep, a market strategist from Heleba told the Frankfurt daily, Frankfurter Allgemeine Zeitung. Pillep said that the rate cut on the part of the Fed would not solve the problem.
Losses for some blue chip technology companies also added to the traders' fears. Apple, the electronics manufacturer, and Motorola, the telecommunications equipment manufacturer, both saw their stock fall by about 13%. Infineon, the German semiconductor manufacturer, saw their stock drop by about 8 percent upon news of its subsidiary Qimonda's negative earnings.
Opinions as to the future of the European and German economy vary. Andreas Hürkamp, stock market strategist for Commerzbank told Frankfurter Allgemeine Zeitung, "We are not reducing our forecast yet. We are convinced that the Dax will increase once again before the year's end, and the Dax at the end of the year will be above 8000," the expert added. Hürkamp said, however, that the mood in the market is the worst it's been in years.