Between April and June, Japanese output fell by 0.8 per cent, the first time the economy has contracted for three successive quarters since 1955. On an annualised basis gross domestic product (GDP) was down 3.3 per cent. The figures were released after the country's embattled stock market closed for business. Thursday's 250-point fall on Wall Street helped drag the benchmark Nikkei index down by 749.05 points to 13,916.98. Taichi Sakaiya, Economic Planning Agency Minister, admitted the growth figure was worse than expected, and added that the government's forecast of 1.9 per cent GDP growth this fiscal year was clearly impossible.
David Coleman at CIBC Markets commmented: "It's becoming difficult to find words to do justice to the dire state of the Japanese economy". The sharp fall in the Nikkei hit sentiment in the European markets in morning trade yesterday. The FTSE 100 briefly dipped below 5,000, hitting a low point of 4988.8, before a stronger-than-expected showing on Wall Street helped propel the index to a close of 5118.6, down just 18 points on the day.
A rare flurry of good news on the corporate front - Intel, Oracle and American Express all released upbeat forecasts - pushed the Dow Jones Industrial Average higher in early trade, despite concerns about the impending publication of the Starr report.
At lunchtime in New York, the Dow was trading up 39.13 at 7654.67, helping stem losses on most major European bourses. In Frankfurt, the Dax closed up 10.6 points at 4754.65 while the Paris CAC 40 finished the day down 11.01 points at 3578.34.
Worries about Clinton hit the dollar, which continued its slide against the yen. The dollar touched a five-month low of 129.15 yen, before regaining some ground in later trade. It also hit a four-month low of 1.67 marks.