Stock markets end turbulent week with more losses

 

Market Data

Last Updated at 00:59 ET

Market index Current value Trend Variation % variation
Dow Jones 16919.59 Up 80.85 0.48%
Nasdaq 4527.51 Up 62.59 1.40%
S&P 500 1981.60 Up 9.86 0.50%
FTSE 100 6779.31 Up 38.06 0.56%
Dax 9334.28 Up 88.95 0.96%
BBC Global 30 7334.04 Down -6.11 -0.08%

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".

Start Quote

Wile E Coyote

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”

End Quote Simon Derrick Bank of New York Mellon
'Painful realisation'

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.

Start Quote

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”

End Quote

"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

Kevin Peachey explains how you could be affected by market turmoil

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."

 

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  • rate this
    0

    Comment number 119.

    I'm off to practice the song, "Buddy can you spare a dime".

  • rate this
    -6

    Comment number 118.

    110.Mr Max So why not quit whining and start generating your own wealth?
    typical tory attitude greed is good.
    Don't you think that was what the rioters were busy doing creating some wealth for themselves too?
    All curtsey of greed of course as typified by the typical tory.
    The problem is we have far too much greed and not enough thinking about the community people live in especially from the rich

  • rate this
    -5

    Comment number 117.

    108.modest_mark
    Belgium. This small state has suffered no government interference and self driven austerity package. It has grown by 2.2% in the last 9 months – a very healthy performance when we look paralysed and weak


    +++

    Comparing Belgium to UK & other EUR countrys is like comparing olympics to paralympics, there are fundamental differences which effect outcomes

  • rate this
    +2

    Comment number 116.

    53. this is Global Issue, it just does not stop at the UK Border, The Labour Government followed the trend of all the other countries. The rest of Europe is in the same boat. Prior to the Euro Greece had a 48% credit card unlike most Northern Europe Nations who had a 16% Credit so to speak. The EU had a fantasy of equality for all but without the policy to back it up.

  • rate this
    +1

    Comment number 115.

    109.mwebst16
    and you have no memory. do you forget how mad maggie got the money by robbing the public pures and selling off UK PLC to her mates at pence in the pound?
    Or perhaps you forget that once all that lot had been spent by her that majour came in promising to cut taxes only to increase by record amounts because of the overspending for the last 16 years by tories

  • rate this
    -4

    Comment number 114.

    People need to chill and realize that this means nothing in the grand scheme of things.
    Money does not mean a thing! It is a tool created by the global elite to keep the little people working and doing there bidding.. in the past it was religion but now its mostly money they use to keep you as slaves.

    I say, let the system fail!! Let the banks collapse!!

  • rate this
    0

    Comment number 113.

    cont
    If the stock market had to put the cash up when they brought the shares they would not worry when prices went down they would buy buy buy.
    But the way it is set up now they can buy unlimited amounts as long as they sell for a profit before close of play at which point they have to either pay their losses or collect their winnings.
    make the stock market a cash affair and you end many problems

  • rate this
    +9

    Comment number 112.

    65.Mr Max
    37 Minutes ago
    "3. Rolfe

    ...that would mean that we would have to let the banking system fall over. In Iceland it did and ordinary people are getting on fine. I say let the banks fall"

    ----

    Iceland went bankrupt. Did you forget that l'il nugget?

    ----

    I dont think he did.Icelands economic pain is over they control thier money now so they are immune..

  • rate this
    0

    Comment number 111.

    "Osbournes plan A looks a little weak now."

    You should look at today's UK borrowing figures and try to imagine what the borrowing figures would have been like had Labour been in power while paying 5% interest rates to service our debt, under Plan B.

  • rate this
    0

    Comment number 110.

    "101. monkeypuzzletree

    The political doctrine that the wealthy will generate wealth is partly true, but wealth for themselves. It' always been the same, that is why they are wealthy. It's a matter of crumbs from the rich man's table called wages."

    ----

    So why not quit whining and start generating your own wealth?

  • rate this
    0

    Comment number 109.

    There are too many people with short memories. New Labour inherited the economy actually running a surplus and then Blair/Brown binged on borrowing for 10 years leaving us in the dire financial condition where spending had to be cut. We should have run a surplus in the last decade and paid down national debt, we would be sitting pretty now then.
    Balls would actually have us borrow more -madness!

  • rate this
    +4

    Comment number 108.

    #5 Osbournes plan "A" looks a little weak now
    .
    Did they ever look strong?. Interesting that as bad as things are in Europe the one country in the face of adversity acheiving growth is Belgium. This small state has suffered no government interference and self driven austerity package. It has grown by 2.2% in the last 9 months – a very healthy performance when we look paralysed and weak

  • rate this
    +2

    Comment number 107.

    71.VanderBart Everyone agrees the national debt has to be reduced thats a given.
    Only the tories think the way to do it is to rise taxes for the masses cut spending on the masses yet at the same time reduce taxes on the richest, who have not seen it as good since mad maggie
    There is no "we are all in this together" with the tories the poor working person pays or the unemployed while the rich party

  • rate this
    +2

    Comment number 106.

    #86 the problem with Keynesian economics is that you have to follow it all the time. What people forget is that Keynes believed in govt spending less in good times so that they had a fiscal cushion to fall back on in bad times to finance the extra spending. Lab. in 2005-8 overspent massively leaving us unable to afford Keynesian policies in bad times

  • rate this
    +1

    Comment number 105.

    86.monkeypuzzletree employ your way out of the problem

    A nice idea that has worked however for tories there is one massive hurdle as to why they could never do that.
    It involves them (the rich) losing some of their money to the poor working person tories can't do that they want it all no matter how many fellow countrymen it destroys.
    I Me MY not us we ours its the tory way
    note working people

  • rate this
    +1

    Comment number 104.

    This year was always going to be a bad year,even our politicians said so during the election when they were pressed. So why should anyone be surprised that we cant just wipe off all our debts and overspending budgets in 12 months and go for growth ? Even Gordon Brown thought we could only half the deficit in 4 years at best,admittedly without saying how and where. Get real for heaven's sake.

  • rate this
    0

    Comment number 103.

    80.Darren Shepperd
    There is much wrong with the system, much that needs to be changed. However mindless rants and insults against anyone who has a point of view doesn't really enhance the arguement does it. Sit down, formulate a well thought out and reasoned arguement and present it for debate. You'll feel a lot better.

  • Comment number 102.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +2

    Comment number 101.

    91,

    The rich getting richer? I agree, with pay freezes and low wages for serfdom., coupled with the upward trend the cost of just about everything. The political doctrine that the wealthy will generate wealth is partly true, but wealth for themselves. It' always been the same, that is why they are wealthy. It's a matter of crumbs from the rich man's table called wages.

  • rate this
    +2

    Comment number 100.

    62.William
    "So Bankers are allowed to riot, loot, commit arson & murder?"



    The IMF is backed by banking sector, IMF & banks makes loans to despotic governments for instance MUGABE, so yes in factual reality, by direct/indirect association & by direct/indirect investment/loans/lending to despots, banks are also part of financing of despotic regimes which comit arson, loot &murder.

 

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