US stock crash continues

NEW YORK, APR 14: Wall Street fell sharply in early trading on Friday as bigger-than-expected inflation numbers at the consumer level rais...

NEW YORK, APR 14: Wall Street fell sharply in early trading on Friday as bigger-than-expected inflation numbers at the consumer level raised the specter of higher interest rates. Already deep in bear territory and reeling from four losingsessions in a row, the technology-laden Nasdaq composite index was down 70 points, or 1.9 per cent, to 3,607.

The Labour Department reported the Consumer Price Index rose 0.7 percent in March. Economists polled by Reuters had forecast a 0.5 per cent gain. The core rate, which excludes food and energy, rose 0.4 per cent, above a forecast rise of 0.2 per cent. The jump was the biggest since January 1995.

The hike raised Wall Street fears that the Federal Reserve will boost short-term interest rates when its policy-setting panel meets May 16. The central bank has boosted short-term rates five times since last June to slow the booming economy.

Pierre Ellis, senior economist at Primark Decision Economics, said the CPI report raised the prospect of the Fed raising interest rates by a 0.50 basis points, instead of the 0.25 basis points Wall Street has expected. quot;The serious news is the core figure being so high,quot; hesaid.

The inflation news overwhelmed robust earnings from Sun Microsystems Inc. Sun, the leading maker of powerful computer servers used to run Web sites, reported quarterly profits that beat Wall Street forecasts, along with a 35 percent jump in revenues. Sun was up 7 at 84-3/4.

Hong Kong stocks closed sharply lower on Friday, although well off early lows, cautious in the face of a jittery US Nasdaq and prepared for further profit-taking in TMT stocks in the coming week, brokers said.

Telecommunications, media and technology-related issues pulled the benchmark Hang Seng Index down 209.80 points or 1.28 percent to close at 16,142.76, an improvement on the volatile morning session8217;s dip to a low of 15,906.29.

Story continues below this ad

Investors, particularly individuals and retail punters, were leery of the outlook for US tech stock-dominated Nasdaq market and its impact on the Hang Seng, brokers said. quot;Shaken. That8217;s the word I8217;d use,quot; said Ted Chen, regionaltechnical strategist at Indosuez WI Carr Securities, referring to local investor sentiment.

Overnight, the Nasdaq slid 92.85 points or 2.46 per cent to close at 3,676.78, pulled down by sector jitters and weakness in the Dow Jones Industrials which closed a hefty 201.58 points or 1.81 per cent lower at 10,923.55. Both the US and Hong Kong markets would be waiting to see if key support levels could be maintained, Chen said.

quot;There is support at this level, 15,900 to 16,000. But it all depends tonight on the Nasdaq,quot; Chen said, adding the it had support at its current levels but would need to close convincingly above the 3,900 level to bring confidence back.

The local market had also seen no new buying interest, given the jittery Nasdaq, brokers said. quot;Things are definitely overdone, but it is difficult to seewhen and where the turnaround will come,quot; said Scott Blanchard, director of Asian sales trading at ABN AMRO Asia Securities.

Story continues below this ad

The market was also digesting the results of China mobile telephone services operator China Telecom Hong Kong Ltd. The company on Thursday reported after-tax profits of 4.8bilion, 30 percent below the previous year due to a massive 8.24 billion yuan writeoff for old equipment. Excluding the writeoff, however, the results exceeded consensus estimates.