三网融合最快3年内实现城市全覆盖 四类公司受益

　　周末最新消息称，三网融合最快会用3年时间覆盖中国城市，而其相关试点方案预计将于本月出台，6月启动。一石激起 千层浪，业内人士表示，广电运营商、软硬件设备提供商、有线运营商、接收终端制造商等四大类公司将成为变革受益者。

　　试 点方案料本月出炉

　　自2008年电信第三次重组之后，中国的电信市场呈三分天下之势：中国电信、中国移动和中国联通。而随着3G时代到 来，三网融合破冰后，整个通信产业将发生巨变。

　　据了解，早在今年1月13日，温家宝总理主持召开国务院常务会议，决定加快推进电信网、广播电视网和互联网三网融合。至此，三网融合正式提上议事日 程。

　　今年2月电子信息产业振兴规划出台，当中就提出要推进三网融合；紧跟着，3月，工信部部长李毅中在接受媒体采访时表示，三网融合的 试点方案预计在5月出台，6月启动；而后在5月，国务院批转发改委通知提出，实现广电和电信企业双向进入，推动三网融合取得实质性进展。

　 　上周末，上海世博会首场主题论坛“信息化与城市发展”开幕，工业与信息化部一位重要官员对外表示，根据他的预期，目前国务院主推的电信网、计算机网和有 线电视网“三网融合”，最快会用3年时间覆盖中国城市，最晚也只要5年时间。

　　行业变革之际，有机构预计，双向化网络设备改造、铺设等投 资就达2500亿元之巨，而整个三网融合建设，可形成6000亿元以上的投资规模。

　　其中软硬件设备提供商将最先受益。数据显示，中国现 有有线用户1.6亿，尚有1亿有线用户并未数字化整转，不考虑有线用户增长，机顶盒开支约350亿元。同洲电子作为国内机顶盒设备 龙头无疑将从中受益；同时，作为光纤通讯设备提供商的中兴通讯、中天科技、烽火通信等 上市公司也将从中分得蛋糕。

　　而内容为王时代的到来，广电运营商获准进入内容运营领域将大幅开启想象空间。具体来看，付费频道价值有望得 到重估，受益电广传媒；影视行业趋势向 好，其三网融合后，电影和电视剧均有望进入有线付费、IPTV和互联网渠道，将极大提升同一内容的市场价值，受益华谊兄弟。

　 　有线运营商则将是三网融合最长远的受益者。三网融合将迫使广电运营商加快跨区域整合、网络改造和更市场化运作，歌华有线、天威视讯等 公司将从中受益。

　　此外，接收终端制造商将迎来新的增长点。网络的普及催生了众多全新的互联网终端产品，比如互联网电视，即可以上网的电 视，用户可以利用它直接连接互联网，实现下载或在线观看电影、视频，获取天气、股市的最新资讯等功能，今年，TCL、三星、创维、长虹、海信等众多电视生 产企业都推出各自的互联网电视，因此海信电器和四川长虹值得关注。

Single currency bloc plays ‘beggar-my-neighbour’

By Martin Wolf

Published: May 18 2010 20:24 | Last updated: May 18 2010 20:24

Might the eurozone break up? Until recently I would have answered: absolutely no. This is not because I thought the currency union a wise idea. I thought it a risky idea, made more so by the decision to accept member countries so different from those of the zone’s northern core. But the commitment to make it work seemed fundamental to the policies of Europe’s principal powers. Is that still true? I do not know.

So what has gone wrong? What is happening now? What happens next? What does it mean for both the eurozone and the world economy?

On the first question, the European orthodoxy is that the crisis is, at root, fiscal. Marco Annunziata of UniCredit summarises it in a recent note: “In hindsight, it seems obvious that the flaw in the eurozone’s institutional setup is both extremely serious and extremely simple: first, a currency union cannot work without sufficient fiscal convergence or integration; second, the eurozone has been unable to create incentives for fiscal discipline.” Mr Annunziata’s chart shows that this view is wrong. Just consider the frequency of breaches of the rules requiring fiscal deficits of less than 3 per cent of gross domestic product. Greece is a bad boy. But Italy, France and Germany had far more breaches than Ireland and Spain. Yet it is the latter that are now in huge fiscal difficulties.

The fiscal rules failed to pick up the risks. This is no surprise. Asset price bubbles and associated financial excesses drove the Irish and Spanish economies. The collapse of the bubble economies then left fiscal ruins behind it.

It was the bubbles, stupid: in retrospect, the creation of the eurozone allowed a once-in-a-generation party. Some countries had vast asset price bubbles; many had soaring relative wages. Meanwhile, Germany and the Netherlands generated huge current account surpluses. The union encouraged a flood of capital to the surging economies, on favourable terms. When private spending imploded, fiscal deficits exploded.

Where are we now? The eurozone politicians’ response to the crisis has been predictable: blame speculators; provide financing of shaky sovereign debtors (thereby rescuing creditors); rule out debt restructuring; and insist that fiscal discipline be tightened in countries with large deficits. The European Central Bank has also invested €16bn in riskier eurozone government bonds – a small sum by the standards of recent interventions, but a powerful signal. The euro has fallen, though it remains high by historical standards (see chart). At best, the eurozone has bought a bit of time for adjustment.

What happens next? Greece is likely to restructure its debt at some point, as John Dizard has argued in the FT. That would not be the worst outcome. Once a country is in the “junk bond” category, no reputation is left. In such circumstances, the benefit of a lower debt burden for creditworthiness is likely to offset the cost of a default. The logical moment is when the primary fiscal deficit (that before interest) is eliminated, supposedly in 2012.

Yet there will be no return to fiscal stability in peripheral countries without a return to growth. For countries with large current account deficits, much of this growth will have to come from net exports. The alternative to higher net exports – a resurgence of private spending and huge ongoing capital inflows – is unlikely and undesirable.

The question is whether peripheral countries, which have lost so much competitiveness since entry into the eurozone, can generate a large structural – not just a cyclical – improvement in net exports. Historically, countries that have suffered debt crises have almost always been helped by a collapse of the exchange rate (see chart). Peripheral eurozone members do the bulk of their trade with one another. So the modest decline in the external value of the euro is little help. Inside the currency union, the way out is through falling prices (more precisely, falling costs). Ireland is on the way; others are far behind (see chart). But this is a drawn-out process and, not least, also raises the real value of debt. Proponents of structural reform ignore these facts.

What does this all mean?

First, markets are right to doubt fiscal resolve. Debt restructuring is quite likely, at least for Greece. But such restructuring cannot remedy the lack of competitiveness.

Second, the eurozone has bought itself time. Among the things it must do with that time is make its financial system credibly solvent and so able to stand a round of private and public debt restructuring.

Third, when analysing the woes of the eurozone, people persistently fail to recognise the private sector’s instability. It has saved too much in some places and spent, lent and borrowed too much in others. This has been a hugely destabilising force, inevitably exacerbated by the “one-size-fits-all” monetary policy.

Fourth, while the peripheral countries wriggle, the fisherman is determined to keep them on the hook. Thus the fundamental proposition in all discussions of eurozone reform and policy is that fiscal policy must be disciplined. Indeed, Mr Annunziata argues that “fiscal limits should be hard-coded into each country’s legislation in the form of automatic, binding and unchangeable rules”. Such rules do apply in US states. But the US has a federal budget, as well. The eurozone has not. The world’s second-largest economy is on the way to adopting the pre-Keynesian fiscal orthodoxy.

Fifth, tension is bound to remain between a Germany determined to impose such fiscal constraints and countries that deny the primacy of such discipline (notably, France) or may prove incapable of sticking to it. Given the big adjustments ahead, it is no longer evident that the eurozone will manage these tensions. German patience could be stretched beyond breaking point.

Finally, the eurozone is moving towards fiscal tightening, with the offset, at least for the moment, of a weaker exchange rate. Americans will see this as a “beggar my neighbour” policy, unlikely to help global rebalancing. How much it will detract from world recovery is unclear. But it will not help.

Despite today’s gloom and doom, the eurozone will probably survive. But the view that everything would now be fine had fiscal rules been followed is wrong. The private sector’s irresponsibility was the biggest failing. Now, the emphasis is again on fiscal tightening. If this is to work, there must also be growth. Will the austerity itself deliver the growth, as some hope? I doubt it. The hair shirt alone will wear badly.

May 10 (Bloomberg) -- The European Central Bank said it will buy government and private bonds as part of an historic bid to stave off a sovereign-deb

May 10 (Bloomberg) -- The European Central Bank said it will buy government and private bonds as part of an historic bid to stave off a sovereign-debt crisis that threatens to destroy the euro.

The ECB wants “to address severe tensions in certain market segments which are hampering the monetary policy transmission mechanism and thereby the effective conduct of monetary policy,” the central bank said in a statement at 3:15 a.m. in Frankfurt. The announcement came less than an hour after European finance ministers unveiled a loan package worth almost $1 trillion to staunch the market turmoil.

Resorting to what some economists have called the “nuclear option,” the ECB may open itself to the charge it’s undermining its independence by helping governments plug budget holes. Four days ago, ECB President Jean-Claude Trichet said bond purchases hadn’t been discussed when members of the bank’s 22-member Governing Council met to set interest rates in Lisbon.

By deciding to “go in and buy sovereign and corporate debt, they crossed a line,” said David Kotok, chairman and chief investment officer at Cumberland Advisors Inc., which manages about $1.4 billion in Vineland, New Jersey. “The line between fiscal and monetary policy gets blurred.”

The euro jumped to $1.2982 at 8:30 a.m. in Frankfurt from $1.2755 at the end of last week.

‘Dysfunctional’ Markets

The ECB said it will intervene in “those market segments which are dysfunctional,” suggesting it views the surge in some of the region’s bond yields as unjustified and that it’s acting to stabilize markets and protect the 16-nation economy.

Investors cited the ECB’s initial refusal to consider asset purchases as one reason for the May 7 rout in global markets, which included U.S. stocks falling the most in 14 months amid concern Greece’s woes were spreading.

After a week in which markets showed growing concern about access to funding, the Frankfurt-based ECB also reversed its withdrawal of emergency steps taken to tackle the global credit crisis, saying it will again offer banks as much cash as they want for terms of three and six months. It will also reactivate a swap line with the Federal Reserve and sell unlimited amounts of U.S. currency for seven and 84 days. The first operations will take place this week.

The central bank acted in concert with governments after markets targeted European economies with the weakest public finances. The extra yield that investors demand to hold Greek, Portuguese and Spanish debt instead of benchmark German bonds surged to the highest level since the euro’s 1999 introduction.

Bunds Drop

The ECB’s strategy will hurt German bunds, lift the bonds of Portugal, Greece and Spain and eventually hamper the euro following an initial rally, said David Zervos, a managing director at Jeffries & Co. in New York.

German 10-year bonds fell when European markets opened this morning, sending the yield up 12 basis points to 2.93 percent.

While the euro’s founding treaty bans the ECB from buying bonds directly from governments, it can do so in the secondary market. The ECB said its moves won’t affect monetary policy as the resulting liquidity will be reabsorbed. The bank’s council will decide on the scope of the intervention.

“They are not cranking up the printing presses,” said James Nixon, co-chief European economist at Societe Generale SA in London. “This is a much more targeted, surgical approach. They buy the duff stuff that no one in the market will touch.”

‘Using Every Means’

Bundesbank President Axel Weber said on May 5 that the threat of contagion from Greece’s fiscal crisis didn’t merit “using every means.” Without referring specifically to bond buying, he said “measures that damage the fundamental principles of the currency union and the trust of the people would be mistaken and more expensive for the economy in the longer term.”

The concern is that the purchasing of government debt opens the ECB to the accusation it’s coming to the rescue of fiscal authorities and may need a bailout of its own if the assets turn sour, raising questions about its independence.

An unchecked increase in the amount of money in circulation could also fan inflation, the containment of which is the ECB’s main aim.

The ECB noted that some governments had vowed to accelerate their fiscal consolidation. Spain’s budget deficit reached 11.2 percent of gross domestic product last year and Portugal’s was 9.4 percent. Greece’s was 13.6 percent.

‘Monetizing’ Deficits

“Much will depend on whether or not euro-zone governments quickly follow through on their pledge,” said Marco Annunziata, chief economist at UniCredit Group in London. “If they do not, it will be hard for the ECB to fight off the charge of monetizing excessive fiscal deficits.”

There are signs banks have started to hoard money again.

Overnight deposits with the ECB surged to a 10-month high of 290 billion euros on May 6, signaling banks are wary of lending to each other on concern about counterparties’ exposure to high-deficit countries. The rate banks say they pay for three-month loans in dollars rose the most in almost 16 months on May 7.

While European banks had claims on Greece totaling $193.1 billion at the end of 2009, that number is dwarfed by their $832.3 billion exposure to Spain and the $240.5 billion with Portugal, according to data from the Basel, Switzerland-based Bank for International Settlements.

‘Decisive’ Action

Until today, Trichet had tried to convince investors that volatility in euro-region markets would subside once the Greek government drew on its 110 billion-euro aid package and implemented its agreed austerity plan. After the May 6 meeting of the ECB’s council, he urged other European governments to take “decisive” action on deficits and said Portugal and Spain were “not Greece.”

With the roots of the current crisis lying in fiscal policy, Trichet has had less of a say in fighting the turmoil. Politicians ignored his pleas for a fast aid package and his advice that the International Monetary Fund not be included in any rescue of Greece.

His role began to shift last week when the ECB broke a commitment not to assist individual countries, saying it would indefinitely accept Greek government debt as collateral regardless of its credit rating. Trichet is today set to talk to reporters after chairing a meeting of central bankers in Basel.

Europe agrees rescue package

Global financial authorities launched an audacious package of measures in the early hours of Monday morning – including €750bn of government-backed loan guarantees and a commitment to buy European sovereign bonds – to combat rising financial market tensions triggered by worldwide fears over public finances.

As part of a co-ordinated response to the growing uncertainty sparked by the Greek debt crisis, the European Central Bank announced it would intervene in government bond markets and join the US Federal Reserve and other main central banks in reactivating extra US dollar liquidity facilities.

The emergency funding facility agreed between the European Union and the International Monetary Fund was worth as much as €750bn ($930bn, £625bn) in loan guarantees and credits to stabilise the eurozone.

The stabilisation scheme agreed by EU finance ministers and top officials after 12 hours of talks in Brussels consists of government-backed loan guarantees and bilateral loans worth up to €440bn ($568bn) provided by eurozone members; a further €60bn supported by all EU members through expansion of an existing balance of payments facility; and up to €250bn provided by the IMF.

Initial reaction to news of the package in Asia trading on Monday morning was favourable, with the euro gaining almost 2 per cent against the US dollar and 3 per cent against the yen. In Japan, the Nikkei average rose 1.3 per cent and Hong Kong’s Hang Seng advanced 1.2 per cent to 20,154.07. European markets were also expected to open strongly on Monday.

US Treasuries tumbled by the most in six weeks and German 10-year bunds fell by the biggest amount for nine months as investors sought more risky assets.

"This is shock and awe part two and in 3-D, with a much bigger budget and a more impressive array of special effects," said Marco Annunziata, chief economist at Unicredit.

The ECB's decision to buy government and private assets to ease market tensions marked a dramatic backdown by the Frankfurt-based institution. It had previously opposed measures that blurred the boundary between fiscal and monetary policy. No limits were set on the level of purchases but the ECB said the objective was to “address the malfunctioning of securities” rather than to help governments.

The purchases would be “sterilised” with the extra liquidity reabsorbed to prevent inflation risks. The ECB will also reintroduce unlimited offers of three-month and six-month liquidity.

Erik Nielsen, chief European economist at Goldman Sachs, said the outlines of the package were impressive.

“In any comparison, in terms of financing needs in southern Europe, this is a substantial amount,” he said.

The EU decided to increase by €60bn its existing balance of payments facility that it used in 2008 to help Latvia, Hungary and Romania, three non-eurozone countries. The facility would be increased to €110bn with the European Commission raising money on the markets using the EU’s €141bn-a-year budget as collateral. It would be extended to cover all 16 eurozone members. Any assistance would carry conditions set by the IMF.

The EU’s efforts were being cheered by Barack Obama, US president, who urged Angela Merkel, the German chancellor, and President Nicolas Sarkozy of France to ensure that the EU was “taking resolute steps to build confidence in markets”.

The €720bn package is in addition to the €110bn IMF and EU rescue plan approved for Greece on Friday and agreed by the IMF board on Sunday.

Alistair Darling, British chancellor of the exchequer, agreed that the UK would take part in the enlarged balance of payments facility after securing legal guarantees that it would not become liable for the debts of eurozone countries. It will not take part in the €440bn loan guarantee scheme.

The new package underlines the threat the current crisis has posed to eurozone stability. “We are seeing wolfpack behaviour in the markets, and if we don’t stop these packs, they will tear the weaker countries apart,” said Anders Borg, Sweden’s finance minister.

Loans for a stricken member will be raised through a special purpose vehicle backed by eurozone government guarantees, in response to demands from Germany. The facility will be organised on an intergovernmental basis among eurozone members, although Sweden and Poland have volunteered to take part. The facility will last three years.

The additional €60bn balance of payments facility will be available immediately but the credit guarantees will require parliamentary approval in most countries.

Christine Lagarde, French finance minister, said the response from international authorities was "consolidated, coherent and determined".

Beijing considers more curbs on developers

Beijing is reportedly considering restricting down payments to developers for uncompleted flats in the latest measure to regulate the sizzling housing market.

Down payments and money from mortgages for unfinished flats will be placed in a special account to be overseen by the government, according to the China Securities Journal.

The government will allow developers to access the account and use the money in accordance with their capital needs for construction of developments, the newspaper quoted an unidentified source as saying.

Pre-sale proceeds will only be allowed to be freely used by developers when the projects are completed and delivered. The proposal is being discussed by the Ministry of Housing and Urban-Rural Development, the People's Bank of China and the China Banking Regulatory Commission, the report said.

Developers, which said they had not heard of the proposal, complained it would deal a blow to their cash flow if they were not allowed to freely use the pre-sale proceeds.

"Pre-sale proceeds account for 30 to 50 per cent of many developers' annual revenue," said Feng Huiming, executive director of the Fantasia Holdings Group. Feng said some small developers could go out of business, describing it as a very tough measure if it became a reality.

Liang Youpan, general manager of Guangzhou City Construction & Development Property Holdings, said developers could see several months of delays in receiving sales proceeds under the proposal, with small cash-strapped companies particularly hard hit.

Analysts said the proposal was aimed at stopping developers using pre-sale proceeds to buy land sites, leading to an increase in land prices.

The reported proposal is the latest in a string of policy moves by the government since April to curb speculation in the property sector.

Last month, the central government issued a series of measures targeting development progress and pre-sale arrangements by developers. Developers were banned from receiving deposits from prospective buyers of uncompleted homes before getting official approval.

Under the new rules, once the government has granted the green light to developers, they must publish the price of each unit available for pre-sale within 10 days. The move was aimed at restricting developers from pushing up prices before the official launch of a property.

On Wednesday, the influential Chinese Academy of Social Sciences suggested that developers who hoard properties to create a false impression of a supply shortage and then push up prices should be fined.

Feng of Fantasia said the series of measures were tougher than he expected. He originally believed the central government would not issue serious cooling measures as property was a pillar industry and an engine to drive the recovering economy.

"The entire economy will be hit if the property market collapses," he warned.

The austerity measures have slowed sales activity in many cities. Evergrande Real Estate Group (SEHK: 3333) said it decided to cut prices for its 40 property developments nationwide by 15 per cent from yesterday.

Developers turn to HK after mainland lending restrictions

The mainland's biggest developers are borrowing record amounts in Hong Kong, taking advantage of lower interest rates to circumvent a lending crackdown at home.

While banks demand at least 5.2 per cent in annual interest for three- to five-year money on the mainland, the cost of credit in Hong Kong dollars has fallen to the lowest since November 2004.

China Overseas Land (SEHK: 0688) & Investment agreed to an HK$8 billion loan in February that pays 1.45 per cent at current market levels, Bloomberg data shows.

"For property developers to keep growing in what is an extremely fragmented and competitive market, they have to go offshore" for funds, said Brayan Lai, a credit analyst at Credit Agricole CIB in Hong Kong. "It's one way to circumvent tight onshore credit."

Syndicated borrowing by mainland developers in Hong Kong dollars jumped to HK$37.3 billion this year, the most since Bloomberg began compiling the data in 1999, from HK$3 billion in the same period last year.

Total lending in the city rose sixfold to HK$63 billion from HK$8.7 billion as mainland banks' share of the market fell to 21 per cent from 29 per cent. Yuan-denominated lending to mainland developers dropped 25 per cent.

China Resources (SEHK: 0291) Land said last week that it agreed to four loans with banks totalling HK$6.2 billion. Agile Property Holdings (SEHK: 3383) borrowed US$125 million in January from a Bank of America Corp unit in Hong Kong.

Shimao Property Holdings (SEHK: 0813) is seeking a US$400 million loan from the Hong Kong units of banks including HSBC Holdings (SEHK: 0005, announcements, news) and Standard Chartered. The loan may pay 3.1 percentage points more than the London interbank offered rate, according to Annisa Lee, a credit analyst at Nomura Holdings.

"Companies are going to the syndicated loan market in Hong Kong because liquidity is strong and pricing is competitive," Lee said. For loans, "property companies don't have to pledge their projects as security, so there's more flexibility with regards to the use of proceeds".

Shimao's US$350 million of 8 per cent bonds due 2016 last traded at a yield of 6.58 percentage points more than Treasuries, according to BNP Paribas prices. The company said on April 13 that 2009 profit more than quadrupled to 3.51 billion yuan (HK$4 billion).

Premier Wen Jiabao's government has staked its "credibility in economic management" on measures to cool the property market, Credit Suisse Group said on April 29, after the state raised mortgage rates and down-payment ratios, barred lending for third homes and tightened scrutiny of developers' financing to restrain speculation. Fuelled by a 4 trillion yuan stimulus package and US$1.4 trillion of new loans last year, property prices jumped 11.7 per cent in March.

The China Securities Regulatory Commission sent financing requests from 41 real estate companies to the Ministry of Land and Resources for review. Companies with property businesses that plan to repay bank loans or boost operating capital must also submit equity financing plans.

Speculators may face tax on property holdings

Beijing should impose a real estate tax on speculative investors in order to rein in the red-hot property market, a leading government think tank said yesterday.

The Chinese Academy of Social Sciences advised the central government to gradually move away from the existing tax on property transactions as this effectively passes the burden on to the buyers in the form of higher prices.

Instead, it suggested a tax be imposed on existing residential property holdings to increase costs for speculators.

"Such a tax is good for controlling property speculation," said Li Jingguo, a director of the land and property research bureau of the urban development and environmental research institute at the academy.

Under the plan, property owners would be taxed on the basis of the number of units they hold or the total gross floor area, according to Li.

Academics and analysts believe the suggestion is aimed at testing the market's response.

"We cannot conclude that the central government is going to introduce this property tax but I see it as a move to test the waters," said Chen Jie, a deputy director of Fudan University's centre for housing policy studies. "There are a lot of problems to be considered before the introduction of such a tax. If it leads to a drastic fall in home prices, that could harm the banking system."

In its report, the think tank suggests that flats used as a primary residence should be exempt from the proposed tax as long as they meet certain criteria. It did not elaborate.

Last month, there was speculation that Shanghai and Chongqing may set a levy on investors holding luxury homes that they either leased or left vacant to bet on capital appreciation.

The report also recommends simplifying the mainland's property transaction tax system by eliminating some taxes.

Transaction taxes are often just passed on to the buyers in the form of higher prices, and therefore have become a factor in price rises, it said.

In some cases, they could lead to problems they were intended to solve, according to Li.

The suggestion came as home prices rose an average of 25 per cent last year, far beyond the 9.8 per cent growth in residents' disposal income per capita in urban cities.

Li said prices in first-tier cities would drop in the second half if tougher measures were imposed.

Alan Chiang Sheung-lai, the head of the mainland residential department of DTZ, said a real estate holdings tax had been discussed for a long time, but he believes it will be Beijing's last resort to cool the market.

"If sales volumes have not cooled down and prices do not fall amid the current measures, the central government may roll out the tax," Chiang said. "However, it seems the market has started slowing."

He expects home prices in first-tier cities this year would fall 22 per cent from the first quarter.

Transactions in major mainland cities fell during the May Day holiday - traditionally a hot season for home sales. In Beijing, only seven new units were sold during the holiday.

Standard Chartered Bank economist Kelvin Lau said Beijing would continue to lift reserve requirement ratio regularly to tighten liquidity. On Sunday, it raised the reserve ratio by half a percentage point from May 10.

China May ‘Crash’ in Next 9 to 12 Months, Faber Says

May 3 (Bloomberg) -- Investor Marc Faber said China’s economy will slow and possibly “crash” within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst.

The Shanghai Composite Index has failed to regain its 2009 high while industrial commodities and shares of Australian resource exporters are acting “heavy,” Faber said. The opening of the World Expo in Shanghai last week is “not a particularly good omen,” he said, citing a property bust and depression that followed the 1873 World Exhibition in Vienna.

“The market is telling you that something is not quite right,” Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. “The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months.”

An index tracking Chinese stocks traded in Hong Kong dropped 1.8 percent today, the most in two weeks, after the central bank raised reserve requirements for the third time this year. The Shanghai Composite has slumped 12 percent this year, Asia’s worst performer, as policy makers seek to rein in a lending boom that’s spurred record gains in property prices. China’s markets are shut for a holiday today.

Copper touched a seven-week low and BHP Billiton Ltd., the world’s biggest mining company, fell the most since February on concern spending in the world’s third-largest economy will slow and after Australia boosted taxes on commodities producers. Rio Tinto Ltd., the third-largest, slid as much as 6 percent.

Chanos, Rogoff

Faber joins hedge fund manager Jim Chanos and Harvard University’s Kenneth Rogoff in warning of a crash in China.

China is “on a treadmill to hell” because it’s hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country’s gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China may trigger a regional recession within a decade.

The government has banned loans for third homes and raised mortgage rates and down-payment requirements for second-home purchases. Prices rose 11.7 percent across 70 cities in March from a year earlier, the most since data began in 2005.

The government has stopped short of raising interest rates to contain property prices. Within an hour of the central bank announcement on reserve ratios, Finance Minister Xie Xuren said that officials remained committed to expansionary policies to cement the nation’s recovery.

Stocks ‘Fully Priced’

The nation’s economy grew 11.9 percent in the first quarter, the fastest pace in almost three years. The government projects gross domestic product growth for the year of about 8 percent.

The clampdown on property speculation may prompt investors to turn to the nation’s stock market, Faber said. Still, shares are “fully priced” and Chinese investors may instead become “big buyers” of gold, he said.

BlackRock Inc. is among money managers reducing their holdings on Chinese stocks on expectations that economic growth has peaked. The BlackRock Emerging Markets Fund has widened its “underweight” position for China versus the MSCI Emerging Markets Index to about 7.5 percent from 4.6 percent at the end of March, the fund’s London-based co-manager Dan Tubbs said.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd, the nation’s three largest banks, are trading near their lowest valuations on record as rising profits are eclipsed by concern bad loans will increase.

Local Governments

Citigroup Inc. warned in March that in a “worst case scenario,” the non-performing loans of local-government investment vehicles, used to channel money to stimulus projects, could swell to 2.4 trillion yuan by 2011.

Housing prices nationwide may fall as much as 20 percent in the second half of the year on government measures to curb speculation, BNP Paribas said April 23. Under a stress test conducted by the Shanghai branch of the China Banking Regulatory Commission in February, local banks’ ratio of delinquent mortgages would triple should home prices in the country’s commercial center decline 10 percent.

Shanghai is projecting as many as 70 million visitors to the $44 billion World Expo, more than 10 times the number who traveled to the 2008 Beijing Olympics. More than 433,000 people visited the 5.3 square-kilometer (3.3 square-mile) park on its first weekend.

Australia Warns on Greek Woes as Japan Pumps in Cash

May 7 (Bloomberg) -- Australia’s central bank warned that an escalation of Europe’s debt woes may cause a “sharp” global economic slowdown and the Bank of Japan mounted the biggest one- day injection of cash since 2008 as stocks tumbled worldwide.

“The fiscal problems in Europe could intensify, prompting a retreat from risk-taking by investors and a sharp slowing in the world economy,” the Reserve Bank of Australia said in a quarterly economic report released in Sydney today. Japan’s central bank said it will pump 2 trillion yen ($22 billion) of funds into the financial system through repurchase operations.

Policy makers across Asia stressed that their economies are likely to be unscathed for now from the collapse in confidence of some European countries to repay debt. Even so, the slide in equities from Wall Street to Sao Paolo to Tokyo and Sydney heightened the attention of officials across the region as Group of Seven finance chiefs scheduled a conference call on the issue.

“We’re keeping thorough eyes on its impact on the domestic market and movement of foreign investors,” Choi Yoonkon, the head of the securities market team at South Korea’s Financial Supervisory Service, said in a telephone interview in Seoul today, referring to the slump in overseas shares.

Japan’s Nikkei 225 Stock Average lost 2.8 percent as of 12:48 p.m. in Tokyo, Hong Kong’s Hang Seng dropped 0.6 percent and the S&P/ASX 200 Index retreated 0.5 percent in Sydney. Asian traders came in today after the U.S. Dow Jones Industrial Average at one point overnight tumbled the most since the 1987 crash, before closing down 3.2 percent.

Assessing Response

Officials differed on their assessment of how the European Union is handling the crisis with Greece, which has faced soaring debt financing costs on concern it will fail to rein in its budget deficit.

“There’s been a problem with the Greeks, and specifically Greek sovereign debt and Europe’s ability to step in on Greece’s behalf, and markets have judged those arrangements to be inadequate,” Australian Prime Minister Kevin Rudd said in an interview with 3AW radio today from Melbourne. That has “spread a broader lack of confidence into market perceptions of a range of other economies in Europe.”

By contrast, Japan’s National Strategy Minister Yoshito Sengoku said Europe is handling the Greek situation appropriately. He also told reporters in Tokyo today that his government is in touch with the European Union and International Monetary Fund with regard to Greece and is watching Tokyo’s financial markets closely.

Asia Resilient

Sengoku added that the Greek crisis won’t have a major impact on Asia’s economy. Philippine Treasurer Roberto Tan said in Manila today that “Asia will be able to lift its own market,” citing the region’s strong economic growth. The RBA said Australia could be affected should the global expansion weaken and undermine commodity prices.

G-7 finance ministers will hold a conference call to discuss Greece’s fiscal situation, Japan’s Finance Minister Naoto Kan told reporters in Tokyo today. He added that he didn’t think countries will call for joint currency intervention, speaking after the euro tumbled yesterday to a 14-month low against the dollar.

The turmoil worsened yesterday when European Central Bank President Jean-Claude Trichet resisted taking any new steps to stem contagion from Greece, which won a 110 billion-euro ($139 billion) aid package from the EU and IMF. The extra yield investors demand to hold Spanish and Portuguese debt yesterday rose to the highest level since the euro’s inception in 1999.

Effect on Rates

Mitsuhiro Onosato, executive officer at the Tokyo Commodity Exchange, said “Tocom may be affected by increased volatility in overseas markets.”

“Japan cannot but be affected by the Greek situation,” said Financial Services Minister Shizuka Kamei, a member of a minority party in Prime Minister Yukio Hatoyama’s government. “There is no way to shut us off from the financial markets.”

Asian central banks, which have begun withdrawing monetary stimulus adopted during the global crisis, may be forced to hold off on raising interest rates in the wake of the stock slide.

“Generally any central bank that has not started its tightening cycle by now will be unlikely to start,” most likely for the rest of the year, said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “The sovereign debt issues are creating a more general liquidity risk and the credit crunch risks that go with that.”

IMF Forecast

Europe’s fiscal woes are coming just weeks after the IMF boosted its forecast for the global economy. The Washington- based lender that mounted rescues of countries from Iceland to Ukraine during the crisis said last month world gross domestic product will rise 4.2 percent this year, the most since 2007.

Economists at JPMorgan Chase & Co., IHS Global Insight and Wells Fargo Securities LLC said this week that the Greek debt crisis will probably trim U.S. economic growth, prices and interest rates over the next couple of years.

Officials in Indonesia and the Philippines ruled out imposing capital controls in response to the market turmoil.

Such a move would “only exacerbate a temporary slump,” the Philippines’ Tan said. Bank Indonesia will ensure a “stable” rupiah and doesn’t plan to impose capital controls, Deputy Governor Budi Mulya said in a mobile-phone text message today.

G-7 to Confer on Greece as Stocks Fall on Contagion

May 7 (Bloomberg) -- The Group of Seven plans to hold a conference call today to discuss the Greek debt crisis, according to Japanese Finance Minister Naoto Kan, after a global stock rout sparked by concern debt woes are spreading.

European members “will probably explain” steps taken with the International Monetary Fund to assist Greece, Kan said at a press conference in Tokyo today. “I don’t think we will be asked to take specific action, such as currency intervention.”

The comments sent the euro rising against the dollar after it hit a 14-month low yesterday, and caused stocks in Asia to pare their losses. The call indicates that finance chiefs from the world’s most developed nations may see escalating risks to the global economic recovery little more than a year after the global credit crisis faded.

“They’ve got to do something -- everything they’ve tried has failed to convince markets that they have the situation under control,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong who previously worked at the U.S. Federal Reserve and U.K. Treasury. “Getting some other parties in to beef up the European Union’s response is the logical next step.”

Jackson added that “the risk is that if not a lot of substance comes out of it, it could do more harm than good.”

Public Message

The G-7 finance ministers aren’t planning to issue a joint statement, but it’s possible each member will publicly deliver a common message, according to a Japanese government official who spoke on condition of anonymity because the plans for the call are private. The G-7 stopped issuing statements after regular meetings since IT last year made the Group of 20 the main arena for setting global economic policy.

The euro advanced 0.6 percent to $1.2697 as of 12:53 p.m. in Tokyo after reaching as low as $1.2529 yesterday. The G-7 hasn’t intervened in the currency market since a coordinated effort in 2000 to buy the euro, which was at the time undermined by lack of confidence in the region’s economic-growth prospects.

Japan’s Nikkei 225 Stock Average was down 2.8 percent as of 1 p.m. in Tokyo after tumbling as much as 4.1 percent earlier. Asian traders came in today after the U.S. Dow Jones Industrial Average at one point overnight slid the most since the 1987 crash, before closing down 3.2 percent.

Bond Retreat

The Wall Street sell-off, triggered by Europe’s debt crisis, was exacerbated by waves of computerized trading. Shares were hit by signs the Greek situation is spreading. The extra yield investors demand to hold Spanish and Portuguese debt yesterday rose to the highest level since the euro’s 1999 inception.

In an effort to maintain orderly markets, the Bank of Japan said today it will pump 2 trillion yen ($22 billion) into the financial system after the Greek debt crisis caused instability in financial markets. The emergency measure was the first same- day repurchase operation since December.

Japan’s currency yesterday advanced to the highest level against the euro since December 2001. Today, the yen weakened 3 percent to 117.86 per euro. It also fell 2.2 percent to 92.66 per dollar.

“Currencies have been moving in a volatile manner,” said Kan, who is also deputy prime minister and took office in January saying he wanted to see a weaker yen. “I expect it will come down,” he also said, referring to the yen’s value against the dollar.

Trichet’s Rebuff

Today’s G-7 call comes a day after European Central Bank President Jean-Claude Trichet resisted taking any new steps to stem contagion. The euro-region’s central bank kept its benchmark interest rate at 1 percent.

Trichet said yesterday that the ECB’s 22-member Governing Council didn’t discuss buying government debt and that Spain and Portugal don’t face the same challenges as Greece, which was granted an international bailout last week. Euro-area governments should instead intensify efforts to cut budget deficits, he said at a press conference in Lisbon.

Greece was given a 110 billion euro ($140 billion) rescue package by the European Union and International Monetary Fund on condition it enact steeper reductions to its budget deficit. Greece’s parliament yesterday approved the austerity measures. Germany, which will provide the biggest share of Europe’s bilateral loans to Greece, will vote on its contribution today.

“The key here is whether they’ll be able to come up with a solution that the market has yet to expect,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo, referring to the G-7 conference call.

The group’s members are the U.S., U.K., Japan, France, Germany, Canada and Italy. The broader G-20 includes countries from Australia to China, Russia, India and Brazil.

Trichet Plays for Time as Greek Debt Crisis Spreads

May 7 (Bloomberg) -- European Central Bank President Jean- Claude Trichet played for time as Greece’s fiscal crisis spread across the Atlantic to drive stocks down from the U.S. to Asia.

The euro slid to a 14-month low yesterday and the Dow Jones Industrial Average dropped the most in a year after Trichet resisted taking any new steps to stem contagion. The ECB hasn’t discussed the option of buying government bonds and the onus is on European politicians to cut budget deficits, he said.

The risk for Trichet is that a refusal to act will see contagion worsen in Portugal and Spain, intensifying speculation they will be forced to follow Greece and seek an international bailout. Australia’s Prime Minister Kevin Rudd said markets have judged Europe’s efforts to help Greece “to be inadequate” and a lack of confidence is spreading to other economies in the region.

“Today’s price action is a call to arms for the central bankers that we hope they hear,” said Stuart Thomson, who helps manage the equivalent of about $100 billion at Ignis Asset Management in Glasgow. “This isn’t the end of the story.”

The extra yield that investors demand to hold Spanish and Portuguese debt yesterday rose to the highest level since the euro’s inception in 1999. The premium on Spain’s 10-year government bonds over German bunds hit 166 basis points.

Euro Slides

In currency markets, the euro fell as low as $1.2529, taking its slide against the dollar since late November to 16 percent. It traded at $1.2692 as of 12:42 p.m. in Tokyo after Japanese Finance Minister Naoto Kan said the Group of Seven will hold a conference call today to discuss Greece’s fiscal woes.

Asian stocks opened lower today, with the Nikkei 225 Stock Average tumbling 3 percent in Tokyo after a 3.3 percent drop yesterday. Australia’s S&P/ASX 200 Index lost 2.2 percent. The Dow average, which at one point plunged the most since the 1987 crash, dropped 3.2 percent, and Brazil’s Bovespa stock index fell to a three-month low.

Markets will continue to test the resolve of policy makers by selling the euro and bonds of high-deficit economies, said Marc Chandler, head of currency strategy at Brown Brothers Harriman & Co. in New York. “In sword fighting it is said if you feel mush, push,” he said. “The market feels mush.”

Trichet is trying to convince investors that turmoil in euro-region markets will subside once the Greek government draws on its 110 billion-euro ($140 billion) aid package and implements an austerity plan. He urged other European governments to take “decisive” action on deficits.

Pressure on ECB

“They see this as a political problem and are looking to the politicians to provide a lead, but the point at which the ECB can do nothing and let markets heal themselves is ending,” said Thomson.

Rudd, the Australian prime minister, said “markets have judged those arrangements to be inadequate,” referring to the package for Greece in an interview on 3AW radio from Melbourne today. “The problem that’s come from that is that it’s spread a broader lack of confidence into market perceptions of a range of other economies in Europe,” he said.

Germany, which will provide the biggest share of Europe’s bilateral loans to Greece, will vote on its contribution today. Euro-area leaders will then meet later in Brussels to sign off on the aid package, which is being co-financed by the International Monetary Fund.

Deadly Protests

Greece’s parliament yesterday approved the austerity measures demanded in return for the bailout amid public unrest. Three people died in a fire in Athens on May 5 set by protesters during a general strike against wage cuts and tax increases.

Investors are concerned that Greece, which had its credit rating cut to junk by Standard & Poor’s last week, won’t be able to make the budget cuts demanded of it and could default on its debts, a fear that is spreading to Europe’s other indebted nations. Moody’s Investors Service put its Aa2 credit rating on Portugal on review for a possible downgrade this week.

Trichet’s stance yesterday was “reminiscent of the one we saw during the credit crisis,” when the ECB refused to follow the U.S. Federal Reserve and the Bank of England to buy government bonds, said Nick Kounis, chief European economist at Fortis Bank in Amsterdam.

If the crisis persists, the ECB “will probably bring back its full array of liquidity-providing operations” such as unlimited long-term loans to banks, said Kounis. “However, we doubt that the central bank will go into the government-bond buying business.”

Bond Purchases

While the ECB cannot buy government bonds directly, it could do so in the secondary market. The concern is that directly financing national deficits runs counter to the ECB’s founding treaty and could also fan inflation, the containment of which is the ECB’s main mandate.

Floating a proposal to buy government debt could lead to a split on the ECB’s Governing Council, said Carsten Brzeski, an economist at ING Group in Brussels.

“I can’t see that Germany would accept it,” he said. “It’s questionable whether the purchase of government bonds would have any positive effect and as long as you can’t guarantee the success, you have to ask whether it’s worth breaking the spirit of the Maastricht Treaty.”

Germany’s Axel Weber said May 5 that the threat of a spreading crisis doesn’t merit “using every means.”

‘Nuclear Button’

Trichet “did not explicitly rule out bond buying, rather just replied that it was not discussed today,” said Christoph Rieger, co-head of fixed-income strategy at Commerzbank AG in Frankfurt. “This approach can be considered consistent with the ECB’s principles. But it risks that the market will still force the ECB’s hand before long.”

Should further steps be needed, the ECB may take them May 20, when its council meets for a regular mid-month meeting that isn’t followed by a press conference, said Christel Aranda- Hassel, an economist at Credit Suisse Group AG in London. “If the market seizes up, the ECB is likely to implement further unconventional measures,” she said.

Trichet made clear yesterday that the ECB always takes the appropriate decisions, even if they’re not conventional, said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London.

“That suggests some flexibility,” he said. “Should contagion take on a new dimension, the ECB will be forced to press the nuclear button and buy government bonds.”

Electronic Trading to Blame for Plunge, NYSE Says

May 6 (Bloomberg) -- Computerized trades sent to electronic networks turned an orderly stock market decline into a rout, according to Larry Leibowitz, the chief operating officer of NYSE Euronext. Nasdaq OMX Group Inc. canceled trades in 286 securities that rose or fell 60 percent or more.

While the first half of the Dow Jones Industrial Average’s 998.5-point intraday plunge probably reflected normal trading, the selloff snowballed because of orders sent to venues with no investors willing to match them, Leibowitz said in an interview on Bloomberg Television.

“If you look at the charts you can see fairly clearly where the trades came in,” he said from New York. “It’s that V-shaped drop where it came down and snapped right back up. You had some very high-cap stocks trading down 50 percent or large percentages in a split-instant because there really was no liquidity in electronic markets.”

The selloff briefly erased more than $1 trillion in market value as the Dow average tumbled 9.2 percent, its biggest intraday percentage loss since 1987, before paring the drop. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are reviewing “unusual trading” that contributed to the plunge.

NYSE Volume

More than 29.4 billion shares changed hands in all U.S. markets today, including traditional exchanges such as the NYSE, rivals Bats Global Markets Inc. in Kansas City and Jersey City, New Jersey-based Direct Edge LLC, and other electronic platforms. The level compares with 2.58 billion traded on the NYSE, making it the biggest gap between the two in more than three years, data compiled by Bloomberg show.

Increasing automation and competition have reduced the Big Board and Nasdaq’s volume in securities they list from as much as 80 percent in the last decade. Now, two-thirds of trading in their companies takes place off their networks because orders are dispersed across dozens of competing venues.

Nasdaq OMX in said it will cancel stock trades that were more than 60 percent above or below price levels at 2:40 p.m. New York time, just before U.S. equities plummeted. The New York-based firm investigated trades between 2:40 p.m. and 3 p.m.

‘Snapped Back’

“The fact that it snapped back so quickly made it clear that it was an aberration,” Leibowitz said. “When a large order or series of orders comes into electronic markets, they don’t really have any way to recognize either that they’re a mistake or to slow them to down to attract the proper liquidity on the other side.”

The NYSE doesn’t know where the trades that triggered the selloff originated, according to Leibowitz. Citigroup Inc. said it found “no evidence” that it was involved in erroneous trades, a finding supported by futures market CME Group Inc., after U.S. equity markets plunged today.

The market rout triggered scrutiny from lawmakers. U.S. Representative Paul Kanjorski, a Pennsylvania Democrat, set a May 11 hearing. U.S. Senator Ted Kaufman, a Delaware Democrat, questioned whether markets that increasingly rely on computer algorithms to execute thousands of transactions in seconds triggered false trades.

“This is unacceptable,” Kanjorski, who leads a House Financial Services subcommittee that oversees the SEC, said in a statement. “We cannot allow a technological error to spook the markets and cause panic.”

Accenture, Exelon

Accenture Plc, Exelon Corp. and Philip Morris International Inc. were among 27 U.S. stocks with at least $50 million in market value that dropped more than 90 percent as U.S. equities tumbled, before recovering by the close, according to Bloomberg data excluding exchange-traded funds.

The Nasdaq’s decision means that trades in Cincinnati-based Procter & Gamble Co., which fell as much as 37 percent for the biggest intraday drop in the Dow industrials, would stand. The world’s largest consumer products company said stock trades that pushed its shares down were probably an error.

“Our greater concern is not the fact that a trade error occurred at all but the magnitude of its impact,” Birinyi Associates Inc., the research and money-management firm founded by Laszlo Birinyi, said in a note today. “We propose that when trading errors have occurred in the past, their impact has not been as significant and impactful

Wall St. rollercoaster: Stocks fall nearly 10 pct

Tim Paradis, AP Business Writer, On Thursday May 6, 2010, 11:28 pm

NEW YORK (AP) -- A computerized selloff possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day.

The Dow recovered two-thirds of the loss before the closing bell, but that was still the biggest point loss since February of last year. The lightning-fast plummet temporarily knocked normally stable stocks such as Procter & Gamble to a tiny fraction of their former value and sent chills down investors' spines.

"Today ... caused me to fall out of my chair at one point. It felt like we lost control," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

No one was sure what happened, other than automated orders were activated by erroneous trades. One possibilility being investigated was that a trader accidentally placed an order to sell $16 billion, instead of $16 million, worth of futures, and that was enough to trigger sell orders across the market.

No one was taking blame, either. The New York Stock Exchange said there was no problem with the Big Board's systems, and all the markets were on a conference call with the Securities and Exchange Commission.

Nasdaq issued a statement two hours after the market closed saying it was canceling trades that were executed between 2:40 p.m. and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge.

The NYSE also said it would cancel some trades on its electronic platform.

There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock. The drop in that stock's price was enough to trigger "sell" orders across the market.

The SEC issued a statement saying regulators are reviewing what happened and "working with the exchanges to take appropriate steps to protect investors."

Whatever started the selloff, automated computer trading intensified the losses. The selling only led to more selling as prices plummeted and traders tried to limit their losses.

"I think the machines just took over. There's not a lot of human interaction," said Charlie Smith, chief investment officer at Fort Pitt Capital Group. "We've known that automated trading can run away from you, and I think that's what we saw happen today."

The market was already wobbly because of fears that Greece's debt crisis will undermine the economic recovery. Traders watched television coverage of protests in the streets of Athens, and the Dow was down 200 when the selloff began less than two hours before the closing bell.

Around 2:40 p.m. EDT, the Dow was at 10,460, a loss of 400 points.

It then tumbled 600 points in seven minutes to its low of the day of 9,869, a drop of 9.2 percent.

On the floor of the New York Stock Exchange, stone-faced traders huddled around electronic boards and televisions, silently watching and waiting. Traders' screens were flashing numbers non-stop, with losses shown in solid blocks of red numbers.

Then the market bounced back, about as quickly as it fell. By 3:09 p.m., the Dow had regained 700 points. It then fluctuated sharply until the close. The trading day ended with the Dow down 347.80, or 3.2 percent, at 10,520.

The Dow has lost 631 points, or 5.7 percent, since Tuesday amid worries about Greece. That is the largest three-day percentage drop since March 2009, when the stock market was nearing its bottom following the financial meltdown.

At its lowest Thursday, the Dow was down 998.50 points in its largest point drop ever, eclipsing the 780.87 lost during the course of trading on Oct. 15, 2008, during the height of the financial crisis. The Dow closed that day down 733.08, the biggest closing loss it has ever suffered.

The impact of Thursday's gyrations on some stocks was breathtaking, if brief. Stock in the consulting firm Accenture fell to 4 cents after closing at $42.17 on Wednesday. It recovered to close at $41.09, down just over $1.

Procter & Gamble, generally a stable stock, dropped as much as $23, almost 37 percent, and rallied to close down only $1.41.

Many professional investors and traders use computer program trading to buy and sell orders for large blocks of stocks. The programs use mathematical models that are designed to give a trader the best possible price on shares.

The programs are often set up in advance and allow computers to react instantly to moves in the market. When a stock index drops by a big amount, for example, computers can unleash a torrent of sell orders across the market. They move so fast that prices, and in turn indexes, can plunge at the fast pace seen Thursday.

Even if there were technical issues, concerns about the world economy are running high.

The stock market has had periodic bouts of anxiety about the European economies during the past few months. They have intensified over the past week even as Greece appeared to be moving closer to getting a bailout package from some of its neighbors.

"The market is now realizing that Greece is going to go through a depression over the next couple of years," said Peter Boockvar, equity strategist at Miller Tabak. "Europe is a major trading partner of ours, and this threatens the entire global growth story."

The Standard & Poor's 500 index, the index most closely watched by market pros, fell 37.75, or 3.2 percent, to 1,128.15. The Nasdaq composite index lost 82.65, or 3.4 percent, and closed at 2,319.64.

At the market's lows, all three indexes were showing losses for the year. The Dow now shows a gain of 0.9 percent for 2010, while the S&P is up 1.2 percent and the Nasdaq is up 2.2 percent.

At the close, losses were so widespread that just 173 stocks rose on the NYSE, compared to 3,008 that fell. The major indexes were all down more than 3 percent.

Meanwhile, interest rates on Treasurys soared as traders sought the safety of U.S. government debt. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.4 percent from late Wednesday's 3.54 percent.