Stock markets end turbulent week with more lossesContinue reading the main story
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Major European share markets closed lower on Friday, ending another turbulent week.
Continued fears about a slowdown in the global economy and high levels of debt in the eurozone had driven indexes lower for much of the day.
At one point, European markets were sharply lower, with falls of more than 3% for some leading indexes.
By the close, London's FTSE 100 was down 1%, Paris's Cac was down 1.9% and Frankfurt's Dax was down 2.2%.
The losses leave the 100 index down 13% on the month, with the French and German markets worse hit, losing 18.3% and 24% respectively.
In New York, falls extended in late trade to take the Dow Jones to a close of 1.57%.
Gold remained a favourite with investors flocking to buy into its safe-haven image and spot gold hit a new record of $1,877 before slipping back to $1,846.50.
Alan Brown, Schroders' group chief investment officer, said: "It is the end of a really torrid week."
Investors are worried global growth is slowing, and that major economies may be heading back into recession.
A former governor of the US Federal Reserve, Laurence Meyer, said he thought the US would manage to avoid a downturn: "I think the most likely development is that we get some rebound - modest, disappointing - rebound in the second half.
"We think there are still some underlying strengths and a lot of positive factors, but not enough to keep the economy above trend, not enough to put the unemployment rate on a downward trend."
In addition, the Greek finance minister tried to reassure investors that his country's new bailout deal was not in doubt.
Evangelos Venizelos' comments came after four countries demanded collateral in exchange for their contributions to the 109bn-euro (£95bn) loan, after Finland agreed a deal with the Greek government.
Austria, the Netherlands, Slovenia and Slovakia have all said they want to do the same, which could complicate efforts to finalise the rescue deal. This underlined concerns that the eurozone debt crisis could be far from over.
But Mr Venizelos told Greek radio the bailout "is not in doubt, because it is of vital importance to the eurozone".
End Quote Simon Derrick Bank of New York Mellon
The euro's performance has reminded us of the point where Wile E Coyote runs off the edge of the cliff and fails to fall simply because it does not occur to him to look down”
On Thursday, Morgan Stanley said that the US and Europe were "dangerously close to recession".
The week has been one of steep declines on global stock markets.
Some bank shares across Europe were hit again, with Lloyds down 4.8% in London and France's BNP Paribas down 4.3%.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said the latest falls meant the FTSE 100 had fallen 16% so far this year, with debt and growth the two major concerns.
"There is a painful realisation that the rhetoric of the policy makers has yet to translate into any definitive plans, which could go some way in assuaging investors' concerns," he commented.
"There seems to have been little co-ordinated action in an effort either to spur growth or to put in place a roadmap for dealing with the increasingly difficult debt situation of many developed economies, most notably the US and Europe."
A recent poll in Germany suggested three-quarters of those surveyed had little or no faith in Angela Merkel to deal with the eurozone crisis, while a similar poll in France suggested only 33% of people had confidence in Nicolas Sarkozy.
Meanwhile the Spanish government has announced a number of measures designed to cut spending and boost growth as it seeks to reduce its deficit.
The cabinet agreed, for example, a sharp cut in tax on the sales of new properties, to help its battered housing and construction sectors.Bear market?
In Asia, South Korea's Kospi dropped 6.2%, while Japan's Nikkei 225 fell 2.4% and Australia's benchmark S&P/ASX 200 index ended down 3.5%.
Many analysts are questioning if a bear market - one in which the long-term trend is negative - has now developed and is here to stay.
The most worrying trend on markets in the past 24 hours has not been the collapse in share prices, but it has been the rise in the price of assets perceived by investors to be less risky: gold and US, UK and German government bonds”
"Bear markets tend to happen when sentiments are low and that comes from weakened demand and bad news flow," Chou Chong of Aberdeen Asset Management told the BBC.
Tobias Blattner from Daiwa Capital Markets added that markets had got "a bit ahead of themselves" earlier in the year, when big rises were seen, and were now repricing.
"We are back a little bit unfortunately to the period after Lehman in which markets are acting more on rumours - on European banks for example," he said.
"Unfortunately markets are acting less on fundamentals and more on rumours."
Also on Friday, oil prices recovered from early losses, as the dollar weakened, making commodities more attractive.
Brent crude was up almost $2 at $108.62 a barrel, while US light, sweet crude fell 12 cents to $82.26, after hitting a session low of $79.17.
The price of oil had fallen earlier as investors bet that slower global growth would dent demand for crude.Bond yields
On Thursday, there was a sharp rise in the price of bonds issued by countries considered to be the least risky. This caused their yields - the implied cost of borrowing - to plummet to historic lows.
The 10-year US treasury yield briefly dipped below 2% to its lowest level since World War II.
The 10-year German bond yield also fell to a post-war low, while the 10-year UK gilt yield hit the lowest level since the 19th century.
So although the lower cost of borrowing is good news for those countries, the "torrent of money" going into putatively safe US and British government debt is redolent of a worrying trend, according to BBC business editor Robert Peston.
He says it means one of two things: "Either money tends to become harder to obtain by those in the private sector who take the risks which generate economic growth and wealth; or the climate of pervasive anxiety means that even when money is available to consumers and businesses, they don't want to spend or invest it."