US markets slumped on Friday marking the 20th anniversary of the 1987 stock market crash that would become known as "Black Monday". All three major indices suffered their biggest decline since August 9th after the ECB injected money into the banking system to help calm markets after BNP Paribas froze three funds that invested in US subprime mortgages. Friday's drop followed record high oil prices and slower corporate earnings growth together with a stark warning from Caterpillar.
The Dow Jones tumbled 367 points to close at 13,522, the S&P 500 dropped 39.45 points to end at 1,500.65. The Nasdaq slid 74.15 points to finish at 2,725.16.
Economic bellwether Caterpillar said Friday that the US economy will be "near to, or even in, recession" next year and that several industries already were. The heavy construction equipment maker also reported quarterly results that were short of estimates. Shares in the company fell 5.3% to $73.57. Other big manufacturers also suffered with 3M Co losing 8.6% to $86.62, pushed further down by falling profits in the LCD television market.
Wachovia helped put more pressure on the financial sector after it reported earnings that fell from a year ago. The US's fourth largest bank was hurt by $1.3 billion of write downs at its investment banking unit as credit markets tightened. Shares closed 3.7% to $46.37.
US light crude oil for November delivery fell $0.87 to settle at $88.60 a barrel. The oil sector fell away in line with the underlying commodity with Exxon Mobil losing 3.1% to close at $92.14. Schlumberger went lower after reporting earnings that topped estimates. Instead investors chose to focus on weak North American results and shares tumbled 11% to $99.32.
COMEX gold for December delivery fell $0.30 to settle at $768.40 an ounce.
Treasury prices rallied, lowering the yield on the 10 year note to 4.39% from 4.49% late Thursday.
The Nikkei dropped 375.9 points to close at 16,438.5 this morning on mounting evidence that the US subprime mortgage crisis is slowing growth in the world's biggest economy. Nintendo led exporters lower after the yen rose to a six week high against the dollar. Nippon Steel dropped after Group of Seven members said the weak US housing market and turbulence in equity markets will slow global economic growth.
The Hang Seng is currently 792.7 lower at 28,672.4, heading for its biggest drop in two weeks. Bank of China led declines among mainland Chinese lenders on concern the nation's central bank will raise interest rates to rein in growth. HSBC slid after UBS cut its rating to "neutral" on rising customer defaults and slower growth in its US consumer finance unit.
The FTSE 100 Index lost more than 1% of its value on Friday in a late tumble following a 200 point fall for the Dow Jones Industrial Average in early trading.
The leading Footsie faller was struggling mortgage lender Northern Rock, which slipped nearly 9%, or 17.6p, to 186.9p after chairman Matt Ridley resigned from the board. Advertising and media giant WPP also suffered after disappointing with revenues growth of just below 5%, which was lower than some City expectations for a figure of around 5.5%. Shares slipped 29p to 665p.
Heavily-weighted banking stocks were hit by Wachovia's news, with HBOS off 25p to 835p, Barclays down 13p at 589.5p and Royal Bank of Scotland slipping 13p to 510.5p.
Among the gainers, insurer Resolution surged to the top of the leaders' board after news of its rejection of a second offer from suitor Pearl Assurance, valuing the firm at £4.8bn. The stock rose more than 2%, or 15p, to 722p. House builders also enjoyed a good session fuelled by bid speculation over FTSE 250 company Redrow and positive broker comment. Talk of a potential approach for Redrow pushed its shares 3%, or 11.25p, higher to 383p and boosted its top-tier counterparts, although most failed to hang on to earlier gains in the falling wider market. Persimmon - eyed as a potential bidder for Redrow - was one of the session's biggest risers after shares lifted 11p to 971p. With Merrill Lynch also noting the investment appeal of house builders, Barratt Developments rose 8.5p to 667p.
Energy giant BP meanwhile failed to hang on to earlier gains following the latest rise in oil prices. BP was 5p down at 611p, while Royal Dutch Shell slipped 18p to 2051p ahead of third-quarter results next week, where both oil majors are expected to show lower profits.
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