Stocks in Turkey and virtually everywhere around the world plummeted Friday as a result of concerns that Washington's $700 billion bailout package, which is set to cost more than $850 billion including tax cuts for the middle class, might not be enough to prevent the US economy and the rest of the world from slowing down further.

Despite the US Senate's approval of the bailout package on Thursday, the markets failed to enjoy the expected relaxation -- especially anxieties that the passage of the bill may not be able to prevent the economy from sinking further. Many commentators opined that the right time to launch the plan was about to pass, or had already passed, and that the desired outcome would not reveal itself.

Returning to trade after a three-day break for the Eid al-Fitr holiday, Turkish stocks faced a bleak picture yesterday, increasing losses by nearly 6 percent at the beginning of the day. The benchmark İstanbul Stock Exchange (İMKB-100) started the morning session with a 5.84 percent decline to 33,612 points over Monday's close. The sell-off eased in the following minutes and the index managed to rally to over 34,000 points. At the end of the first session, the index showed 33,820, down 2,230 points, or 6.2 percent. The index, however, rallied some in the second session, ending the day at 34,553 points, a 4.16 percent overall loss over Monday's close. The YTL also plummeted against the dollar. At the beginning of the week $1 bought YTL 1.2395, but it was traded at more than YTL 1.31 during yesterday's frenzy, the highest level in five months.

For İMKB President Hüseyin Erkan, the pause in trading on the stock market for the past three days was “very helpful,” considering that stock markets throughout the world were hit hard after the initial rejection of a bailout plan by US lawmakers on Monday. Still, he estimated that sharp fluctuations in the market would rule the day. Turkish stocks were spared from this week’s carnage, which churned global markets. Russia also sought refugee from the storm by temporarily calling off trade until the bumpy course passes.

Speaking to a group of reporters after visiting the İMKB headquarters in İstanbul yesterday to be briefed by experts on what is going on in the markets, Erkan pointed out that trade volume in the market was very low, indicating a cautious mood on the part of investors. However, it is not a distinctive attribute of the Turkish markets alone since almost all markets in the world suffered from exactly the same ambiguities and concerns, he noted. “The ambiguity will likely continue even if the House of Representatives votes in favor of the package today in its second vote,” he underlined.

Bankers said the global demand for the dollar was the main cause behind the sudden rise in foreign exchange rates. Compounded interest rates jumped to over 20 percent in the early morning session but later retreated to slightly below this critical level.

Cemal Demirtaş, director of Oyak Securities’ research department, said yesterday’s sharp fluctuations were no surprise to investors. “At present, fears flooding in from abroad are prevailing over the markets. It has become extremely difficult to discuss the values of companies traded on the stock market. We are now passing through a time in which it is almost impossible to even make an assessment on how much the economy will grow.”

Turkish Economy Bank (TEB) foreign currency desk manager Levent Güven estimated that optimism would spread through world markets soon after the passage of the package in the US Congress. However, he said, it is very unlikely for the YTL/dollar rate to fall below the 1.3 level.

Stocks hit fresh lows on bailout, US data nerves

The grim concerns over the success of the US bailout package and measures devised by other countries to stem the ongoing crisis caused huge losses in global stocks as well. World stocks fell to a fresh three-year low on Friday. Investors worry that recent data, yet to capture the full shock to the labor market and consumer confidence from September’s series of bank failures and troubles, are already showing that the economy is nearing recession. Investors also chose to stay on the sidelines ahead of a closely watched US jobs report due to be released later.

“There are plenty of reasons for people not to have bets on the table ahead of the weekend,” said Jeremy Batstone-Carr, head of private client research at Charles Stanley. “The markets are going to be treacherous, we are close to two big hurdles, the last of which [the vote on the bailout] is after markets in Europe close... so it will take a tenacious investor to make an investment on a day like today.” The FTSEurofirst 300 index fell 0.3 percent on the day while MSCI main world equity index lost 0.4 percent, hitting its weakest since July 2005.

According to Standard&Poor’s, all 52 world equity markets declined in September, resulting in a $4.1 trillion loss. Since January, world equity markets have lost $10.5 trillion. The dollar, on track for its biggest weekly gain in 16 years, held near a one-year high against a basket of major currencies.

Virtually all Asian markets were in the red -- Australia, Singapore, India, Malaysia and Thailand. Only Taiwan bucked the regional trend and edged higher. Dismal data on the US economy -- a vital export market -- helped send Japan’s benchmark Nikkei 225 stock average skidding 216.62 points, or 1.94 percent, to 10,938.14, the lowest since May 18, 2005. In Hong Kong, the Hang Seng index slid 2.3 percent to 17,804.

“The bailout could move us toward a solution, but there are many unresolved issues,” said Tim Rocks, Asia strategist at Macquarie Securities in Hong Kong. “We’re starting to see the first evidence that the US economy is starting to suffer, and this will have an impact on Asia exports through next year.”

Later in the day, the European markets recouped early losses Friday on expectations the US House of Representative will back the government’s bailout plan. Britain’s FTSE 100 index was up 0.41 percent at 4,890.41, while the CAC 40 in France was 0.12 percent higher at 3,968.43. Germany’s DAX was performing the best of all, up 0.58 percent at 5,694.14.

In the US, Dow Jones index futures indicated an open around 0.5 percent higher, clawing back some of the 348 point losses recorded Thursday. Investors are eager to see the government’s plan to buy up the bad mortgage-related debt on US banks’ balance sheets passed by the House.

Observers think that the House will back the proposal this time, following changes to the proposals. House Speaker Nancy Pelosi said a vote would not be brought to the floor unless passage was likely. The vote was expected to take place during market hours.

Even though the pressures in stock markets appear to have settled down for the moment, more stress showed in money markets, particularly in Europe, where the euro interbank offered rate, or Euribor, hit a new all-time high of 5.34 percent. Meanwhile, the key London interbank bank offered rate, or Libor, also climbed to a nine-month high of 4.33 percent.

Elsewhere, the dollar edged up to 105.03 yen from 104.97 late Thursday in New York. The euro climbed to $1.3849. Oil prices were steady in European trading, with light, sweet crude for November delivery around the $94 mark.

Meanwhile, the US stocks headed for a higher opening yesterday after Wells Fargo Co. agreed to buy Wachovia Corp. and ahead of an expected House vote on the financial rescue plan.

The banks’ $15.1 billion plan cheered investors because unlike several recent banking deals, it hasn’t been put together at the behest of regulators or using government money. The agreement upends a plan announced Monday by Citigroup Inc. to acquire Wachovia’s banking operations for $2.16 billion, a deal orchestrated by regulators. The deal comes as investors remain eager for some resolution on the government’s plan to buy up the bad mortgage-related debt blamed for clogging the world’s credit markets.

Dow futures rose 54, or 0.51 percent, to 10,611. Standard & Poor’s 500 index futures rose 8.90, or 0.79 percent, to 1,133.30, and Nasdaq 100 index futures rose 10.50, or 0.70 percent, to 1,521.00.

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