World economy in 'major downturn'
Downbeat forecasts contribute to recession fearsNEW YORK -- Stock markets around the world slumped further Wednesday, with the U.S. doing better than most countries, as global recession fears took center stage.
Downbeat economic forecasts from the International Monetary Fund left stocks down despite a 50 basis points interest rate cut coordinated between the U.S. Federal Reserve and European central banks.
Some big-name media and entertainment stocks continued their recent slumps and hit 52-week lows Wednesday, including India's AdLabs Films, which declined 9.8%; India's Eros International, listed in London, which lost another 3.7% of its value; and German pay TV giant Premiere AG, whose stock fell 4.1%. Shares of U.K. broadcaster ITV hit a new 52-week low but rallied to close unchanged in the end.
In the U.S., ADRs of Sony (down 5.5%) and shares of Viacom (down 3.8%) and CBS (down 3.6%) were among those setting new 52-week lows.
The Hollywood Reporter Showbiz 50 index fell below the 700-point mark to set a new all-time low of 685.39 early Wednesday before recovering and closing down 0.8% at 776.12. Its biggest decliners were Lionsgate (down 11.8%) and John Malone's Liberty Capital (down 9.8%).
U.S. markets swung back and forth all day before closing down. The Dow finished 2% lower, and the broad-based S&P 500 index dropped 1.1%. The damage was more pronounced elsewhere. In London, the FTSE 100 index finished down 5.2%, the German DAX lost 5.9%, and Japan's Nikkei shed 9.4%. Hong Kong's Hang Seng was down 8.2%.
The Federal Reserve, European Central Bank, Bank of England as well as the Canadian, Swedish and Swiss central banks each cut their benchmark interest rates by half a percentage point Wednesday in a rare coordinated move to send a strong signal of unity as markets try to overcome the current financial crisis.
However, the move seemed partly overshadowed by the International Monetary Fund, which slashed its forecasts for economic growth around the globe.
According to the IMF, the U.S. and Europe already are in or on the brink of recessions. IMF officials said the rate cuts were steps into the right direction but that more might be needed to overcome frozen credit markets and low consumer morale.
The Washington-based IMF cut its 2008 forecast for world economic growth from 4.1% -- as projected in July -- to 3.9%. For 2009, its estimate fell from 3.9% to 3%, which would mean the slowest pace in seven years.
"The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s," it said.
The world's advanced economies will see the weakest momentum since 1982 next year, while emerging countries also will experience a hit to their growth, according to the IMF forecast.
In the U.S., it sees growth slowing from 1.6% in 2008 -- ahead of its July projection of 1.3% -- to merely 0.1% next year.
"For the remainder of 2008 and early 2009, the U.S. economy faces flat to negative growth," the IMF said. "An emerging turnaround in the housing sector and more stable oil prices should help lay the basis for incipient recovery in the second half of 2009."