HOUSTON --The recent sell-off on US stock markets reflects tightening credit, which could make riskier chemicals projects harder to finance, an officer with a consultant firm said on Monday.
The Dow Jones Industrial Average reached 13,321.08 in intraday trading on Monday. While up from 3 August, the index was down 5% from its 2007 record closing of 14,000.41.
The drop in the stock market reflects concerns about tightening credit, said Andrew Swanson, vice president of chemicals for Nexant, a US chemical consultant firm.
US residential credit markets have already tightened, due to rising mortgage defaults for sub-prime loans. There were new concerns that the problems in the mortgage market could spread.
"Credit markets are continuing to re-price risk across the board, and investors are wondering when the next financial corpse will float to the surface," the editorial board of The Wall Street Journal wrote on Monday.
If credit tightens further, companies will be less likely to make investments, Swanson said. In addition, riskier projects will receive more scrutiny from lenders.
However, other signs indicate growth for the US economy and the chemicals sector.
The US economy is expected to grow by 2-3% when compared with 2006.
Overall, exports and personal consumption remain strong in the US, Swanson said. "That's my view, that there is going to be a modest, but reasonably solid growth."
The chemicals industry continues to operate at high utilisation rates, he said.
A clearer picture of the US economy could be revealed on Tuesday, when the US Federal Reserve releases an assessment of the economy.
The US housing sector and automobile industry have both reported falling sales.
The National Association of Home Builders slashed its forecast for housing starts in 2007 to 1.42m, down by 9% from an earlier prediction. For 2008, the estimate was revised down by 15%, to 1.45m.
Research firm Autodata said US automobile sales in July fell 13% from the same time last year.
Many chemical producers, including Dow Chemical and DuPont, have cited the erosion of demand in the automotive sectors as soft spots in their most recent quarterly financial reports.
The Dow Jones Industrial Average reached 13,321.08 in intraday trading on Monday. While up from 3 August, the index was down 5% from its 2007 record closing of 14,000.41.
The drop in the stock market reflects concerns about tightening credit, said Andrew Swanson, vice president of chemicals for Nexant, a US chemical consultant firm.
US residential credit markets have already tightened, due to rising mortgage defaults for sub-prime loans. There were new concerns that the problems in the mortgage market could spread.
"Credit markets are continuing to re-price risk across the board, and investors are wondering when the next financial corpse will float to the surface," the editorial board of The Wall Street Journal wrote on Monday.
If credit tightens further, companies will be less likely to make investments, Swanson said. In addition, riskier projects will receive more scrutiny from lenders.
However, other signs indicate growth for the US economy and the chemicals sector.
The US economy is expected to grow by 2-3% when compared with 2006.
Overall, exports and personal consumption remain strong in the US, Swanson said. "That's my view, that there is going to be a modest, but reasonably solid growth."
The chemicals industry continues to operate at high utilisation rates, he said.
A clearer picture of the US economy could be revealed on Tuesday, when the US Federal Reserve releases an assessment of the economy.
The US housing sector and automobile industry have both reported falling sales.
The National Association of Home Builders slashed its forecast for housing starts in 2007 to 1.42m, down by 9% from an earlier prediction. For 2008, the estimate was revised down by 15%, to 1.45m.
Research firm Autodata said US automobile sales in July fell 13% from the same time last year.
Many chemical producers, including Dow Chemical and DuPont, have cited the erosion of demand in the automotive sectors as soft spots in their most recent quarterly financial reports.
