MercoPress. South Atlantic News Agency

Volatile week ends with markets falling and fears of more to come

Stock markets in United States fell heavily on Friday following a volatile week. The Dow Jones, which saw triple digit gains on Wednesday and Thursday, fell by 2.1%, 284.8 points, to 13,178.5. The Nasdaq lost 2.5% to 2,511.25 points.

Selling was driven by continuing concerns over financial institutions, especially sub-prime lenders, and its knock-on effect to the credit market. Despite Friday's heavy falls, the Dow Jones only lost 0.5% over the week. A week earlier, Wall Street saw its worst five days of trading in four years. Equity markets have been concerned for some time that the problems affecting the US housing market will grow into a credit crunch that will hit the wider economy. The sub-prime mortgage market, which offers high interest loans to higher risk customers or people on low incomes, has suffered as the US central bank - like many others - has increased interest rates to curb inflation. This has resulted in record numbers of defaults in the past year, and dented investor enthusiasm for financial companies that have exposure to the industry. Higher interest rates have also made it more expensive and thus difficult for private equity groups to continue to finance buyouts. This has led to concerns that the takeover boom that has been a critical driver of stock market performance over the past few years could fizzle out. Shares in big home lenders, including Countrywide Financial and Washington Mutual, fell by more than 6% on Friday and Accredited Home Mortgages saw its shares fall 31% after it announced plans to close down most of its operations, making it one of the biggest casualties of the US housing slump. Global markets have all seen volatility in the past fortnight. The London market beat a retreat on Friday as weaker-than-expected US employment figures concerned traders. The FTSE 100 index ended the week down 1.2% at 6,224.3 while French and German markets fell by similar number of percentage points. In Latinamerica Brazil's Bovespa dropped 3.74%; Argentina's Merval ended the week 0.07% below; Chile's IPSA lost 0.43% on Friday and Mexico's IPC stock index fell 2.38% to 29,671.77 points, while the Peso slipped 0.28% to 10.987 per dollar. Earlier this week an opinion poll from The Wall Street Journal and NBC showed that two thirds of US citizens believe the country is heading for a recession this or next year. Almost half, 46% replied that the US economy already was in recession.