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US traders relieved despite Dow ending down 4 percent

(Agencies)
Updated: 2008-10-25 09:39

Stock investors avoided panic even as oil fell sharply, closing near $64 a barrel, despite a decision by the OPEC cartel to cut production quotas by 1.5 million barrels a day. OPEC officials, meeting in Vienna, left no doubt that they were ready to slice production again quickly if Friday's decision does not end the price freefall.

Traders work in the crude oil options pit at the New York Mercantile Exchange on Friday, Oct. 24, 2008 in New York. Oil prices fell sharply to around $63 a barrel Friday amid weakening global demand for crude, despite a decision by the OPEC cartel to cut production quotas by 1.5 million barrels a day starting next month. [Agencies]

"Oil prices have witnessed a dramatic collapse, unprecedented in speed and magnitude," the 13-nation cartel said in a statement.

The dollar plunged below 93 yen, a 13-year low. The British pound fell 8 cents against the dollar, its largest intraday drop since 1971.

Stocks shuddered around the world. Japan's Nikkei stock average dropped 9.6 percent. Hong Kong's benchmark index fell 8.3 percent. As the US market prepared to open, both Germany and France's key indexes were down 10 percent, although both narrowed their losses, with Germany's benchmark DAX index closing 5 percent lower, while France's CAC40 dropped 3.5 percent.

Markets in India, Thailand, Indonesia and the Philippines also fell as investors pulled money out of developing countries on fears they would not only be hit hard by the financial crisis but may also default on debt.

Selling had spread on sobering economic data and weak earnings.

The UK's third quarter gross domestic product fell 0.5 percent, the first decline in 16 years, putting the country on the brink of recession. Shares of Japan's Sony sank more than 14 percent when it slashed its earnings forecast for the fiscal year.

In Germany, Daimler stock dropped 11.4 percent in morning trading; it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.

"Periods of panic punctuated by occasional calm appears to be the manner of things for now," said Daragh Maher, a strategist at Calyon Corporate and Investment Bank in London.

The Federal Reserve Open Market Committee, which sets the Fed's target short-term interest rates, meets Tuesday and Wednesday. Most investors are expecting further rate cuts beyond the current 1.5 percent, which is already near historic lows.

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