World stock markets slump on European debt fears

Global equities tumbled on Friday and the euro hit a nine-month dollar low as investors ran for cover on fears that soaring European state debt could damage a fragile economic recovery.

In late morning European trade, London lost 1,93%, Frankfurt shed 1,57%, Paris fell 2,48% and Madrid dived 2,63%.

Across in Asia, Tokyo plunged 2,89% and Hong Kong nosedived 3,33% on renewed concerns about battered state finances in Europe, following New York’s worst finish since November.

Meanwhile, the euro dropped to 1,3648 dollars, the lowest level since May 6 2009, as risk-averse investors bolted for the safe-haven greenback ahead of US jobs data out later in the day.

“It’s been a dismal 24 hours … as stock markets, commodities and currencies have fallen around the world, while bond default risk has soared [and] investors have fled risky assets into the relative safety of the dollar,” said CMC Markets analyst Michael Hewson.

“Fears of [a] European sovereign debt default, as well as a surprise rise in US jobless claims, have spooked investors ahead of today’s US payroll data.”

European equities plunged on Thursday as investor fears over rising debt levels in some eurozone member states became more acute and US data offered scant hope for a recovery in the jobs market there.

The biggest losses on Thursday were in Spain and Portugal, seen as the next weakest links in the eurozone chain after Greece, and their markets also fell sharply on Friday.

Many countries around the world borrowed enormous amounts of money to help combat the global financial crisis and subsequent recession with emergency financial stimulus measures and banking sector bailouts.

“The real concern is that the whole ‘recovery’ is nothing more than poorly directed government stimulus which has simply had the effect of boosting asset prices,” GFT analyst David Morrison told Agence France-Presse.

The perilous financial state of some European nations has now sparked deep concern about potential downgrades by the main ratings agencies, which would make government borrowing costs even more expensive.

“This was always going to be an issue surrounding the wholesale bailout of banks, insurance companies like AIG, and support for autos and housing,” Morrison said.

“We now have all these debts and toxic assets on government balance sheets — and they have to be paid for.

“There is a prospect of higher taxes, slashed spending — so lower standard of living — and ultimately higher borrowing costs, so recovery is made even more difficult.”

Across the Atlantic on Thursday, Wall Street wilted as weak US data combined with heightened fears of debt problems in European Union countries sent shockwaves through the markets. — AFP

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Roland Jackson
Guest Author

Related stories

WELCOME TO YOUR M&G

Already a subscriber? Sign in here

Advertising

Latest stories

Noxy Goyi’s story of survival is one of a woman’s...

The breadwinner lost her job and, desperate not to sit at home, she started selling food on the street on a table made of bread crates. Now she employs two people

Three ‘gringos’ brave heat, mosquitos, illegal gold miners and pirates...

A Wits University accounting professor has returned from his Amazon expedition he undertook to fight climate change

Fintech firms ramp up investments in Kenya’s microfinance space

Kenya’s microfinance banks are the target of fintech firms from abroad seeking to sidestep stringent regulatory perimeters for digital lenders

Harbour views at 9th Avenue Waterside

The award-winning eatery, which offers fine wines and food, is on stilts at Durban’s harbour
Advertising

press releases

Loading latest Press Releases…
×