Stock markets end turbulent week with more losses

 

Market Data

Last Updated at 20:54 ET

Market index Current value Trend Variation % variation
Dow Jones 18030.21 Up 6.04 0.03%
Nasdaq 4773.47 Up 8.05 0.17%
S&P 500 2081.88 Down -0.29 -0.01%
FTSE 100 6609.93 Up 11.75 0.18%
Dax 9922.11 Up 56.35 0.57%
BBC Global 30 5063.32 Down -0.01 -0.02%

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
    +1

    Comment number 199.

    Fear is a powerful "stimulus," so investors who are fearful will be bearish. But it is curious that "fear of" is used in these stories, because it seems to me it is already fact that the global economic meltdown has occurred, and the present condition in the United States is beyond recession and into depression.

  • rate this
    0

    Comment number 198.

    193. AnotherEngineer
    'Yes, the chains are getting a bit tight!
    I think you meant lose'

    Lol, Well spotted.. i was just checking that you were listening! ..really, i was ;)

  • rate this
    0

    Comment number 197.

    The bail out was a big mistake which not only delayed the natural economic collapse, but put consumers in a worse position to deal with it. If the banks had been allowed to collapse and we had all been given a share of the money used to bail them out then economically, for most, the world would be a much better place right now. Put irresponsible bankers and politicians in prison for their crimes..

  • rate this
    0

    Comment number 196.

    How do you spell Ponzi Scheme again?

    In all seriousness we need to take a close look at where wealth (and thus growth) actually comes from. Currently it seems to be from "value add" by selling something for more than it costs to make, or borrowing from the future (debt). It may explain why we have these "corrections" periodically.

    I get the distinct impression of a snake eating it's own tail.

  • rate this
    +1

    Comment number 195.

    Re 70: Suchan104

    "No comment (or BBC headline) yet about the news out this morning that the UK public finances were in SURPLUS in July."

    media. They're far to busy with the bad news, or if they can't find any then it's back onto Murdoch.

    Repeat the mantra Good news is no news, good news is no news, good news is no news.

  • rate this
    +2

    Comment number 194.

    If we go into a recession/depression - who is to blame?

    The last government?
    This government?
    Neither of the above, as it is a global crisis?

    Guess it depends on who you talk to. I think blaming the last government is losing its effect. The last government said it was a global problem with mixed results.

  • rate this
    +1

    Comment number 193.

    173.Ivan Stang

    Lol, we have nothing to loose but our chains!!

    ========

    Yes, the chains are getting a bit tight!

    I think you meant lose

  • rate this
    0

    Comment number 192.

    176.physicistjay

    True comment - but as the estate agents where fueling the price boom by vastly overvaluing property, (whilst they were making 3% commission - conflict of interest?) allot of people had no choice than take huge loans - remember it was america that started all this with their toxic sub-prime mortgage market misselling to other countries, and now i / you are paying for it.

  • rate this
    +2

    Comment number 191.

    Bloated profiteers are getting their fingers burnt,best news I have heard in a long time.let these profiteers feel the cold,for far too long we have been held in thrawl to the "city". The City is reponsible for most of the worlds ills. Business owners care nothing if their "wage slaves" loose all they have. I await with hope of reading the FTSE is "down" to 666 a number well known to the "City".

  • rate this
    +1

    Comment number 190.

    @176 Hmmm. So in one sense I agree the agent was to blame, but as I had enough sense to refuse the mortgage. Others should've done the same, so they are to blame.
    ---
    I never said that the public was not to blame, what I said was the lenders have just as much blame for this mess as the borrowers they have power to decline, oh wait that would have dented their monthly bonus!

  • rate this
    0

    Comment number 189.

    Re 62: William
    How many criminal bankers have been thrown in jail?

    None . . . . . because as far as I'm aware they've done nothing illegal, Immoral yes, but not illegal, unless you'd like to tell us otherwise.

  • rate this
    +2

    Comment number 188.

    170.VanderBart you really are deluded if you think private sector can survive without all those necessary things that go into enabling business to continue.
    If it was possible for capitalists to survive without needing state services don't you think the super capitalists over in America would have got rid of the state long ago?
    Are you one of those only out for i me my and screw over workers

  • Comment number 187.

    All this user's posts have been removed.Why?

  • rate this
    +2

    Comment number 186.

    170.VanderBart
    I don't think I was a show jumper before going on to work in the private sector and i retired at 39 so perhaps i fit into the rich category as my insurance does say job :- retired private means ;)
    However unlike tories i have morals and use my money for the good of those around me not so i can screw even more out of society.

  • rate this
    +7

    Comment number 185.

    @179. lfischerpe

    I totally agree!

    Scrap the money and remove the greed. Everyone working towards the well being of the community, producing what the community needs when its needed.

  • rate this
    -1

    Comment number 184.

    Too many people trying to Blame the Tories for this mess while forgetting the govt that took over and claimed to be in charge of 10 years of unmitigated growth yet still managed to leave the country broke.
    Sorry, but the blame for this falls squarley with his Toniness who despite having multiple opportunuities to do the right thing, took the lazy gutless option.

  • rate this
    +3

    Comment number 183.

    I think maybe you will want to read this:
    http://en.wikipedia.org/wiki/Usury
    Especially the small section on "Usury and slavery in present day", as this is relevant for most of us. Although all of it is a fascinating read and rather illuminating.

  • Comment number 182.

    All this user's posts have been removed.Why?

  • rate this
    +1

    Comment number 181.

    Wat a fantastic opportunity to buy in to the market and for those using pound / cost averaging.

  • rate this
    +2

    Comment number 180.

    166.CryFreedomMachine
    The burden of debt has greatly passed from banks/financiers to citizens/taxpayers via government bailouts & guarantees.

    Sorry its only passed on to the poorer 80% of the population. The top 20% are making far too much extra money to notice thanks to tory tax cuts for them.

 

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