Arab Today, arab today banks lead us european stock plunge
Last Updated : GMT 13:22:57
Arab Today, arab today
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Banks lead US European stock plunge

Arab Today, arab today

Arab Today, arab today Banks lead US European stock plunge

London - AFP

Stocks plunged Europe and on Wall Street on Wednesday, with bank shares leading the selloff amid new concern over Greece, and talk of danger for France's credit rating which was immediately denied. The slump of up to six percent in Europe and more than four percent on Wall Street, coupled with a record rise of gold, came only a day after markets soared on signals by the US Federal Reserve that it would hold ultra-low interest rates for another two years. But the relief rally quickly lost steam and stocks resumed a plunge that has in recent days seen many European markets lose over a tenth of their value in a selloff triggered by concerns over debt and an economic slowdown. Sovereign debt worries were amplified Wednesday by a Fitch downgrade of Cyprus and comment that the eurozone nation would need an EU bailout. This came only days after the historic downgrade of the US credit rating by Standard & Poor's. In foreign exchange deals, the dollar steadied against the euro, after having earlier slid on the Federal Reserve news. The European single currency dipped to $1.4191 from $1.4374 in New York late Tuesday. The dollar slid against the Japanese unit, buying 76.45 yen compared to 76.94 on Tuesday. At closing, Frankfurt's DAX dived 5.13 percent to 5,613.42 points and Paris' CAC-40 plunged 5.45 percent to 3,002.99 points. London's benchmark FTSE 100 index was down 3.05 percent to 5,007.16 points, also hit by news that the Bank of England has downgraded its 2011 British economic growth forecast. In the United States, in midday trading, the Dow Jones Industrial Average fell 3.22 percent after losing more than 4.0 percent earlier, the broader S&P 500 index was down 3.2 percent and the Nasdaq dropped 2.59 percent. In other European markets, Madrid tumbled 5.49 percent, Milan fell 6.65 percent, Amsterdam slid 3.41 percent, and Zurich dropped 4.12 percent. Shortly before Wall Street opened, banking stocks turned the European rally into a rout. "It was a crazy session. The banking sector hasn't been hit this violently since 2008," Renaud Murail, asset manager at Barclays Bourse in Paris said. Apparently sentiment was pushed by a mixture of factors: renewed concerns about Greece after the finance minister made comments on the eurozone rescue bond swap, concern about France's credit rating and rumours France might increase taxes on banks. The French finance ministry categorically denied the rumour of a downgrade and Fitch rating agency said the outlook for France's "AAA" was stable. The French president's office said after a government meeting that within two weeks France would announce extra action to ensure that it meets tough targets on cutting its budget deficit. However, uncertainty centered on whether the new European Union rescue fund will be increased, and many analysts say that if it were, the burden would cost France its top rating. In Madrid, an analyst at IG markets, Soledad Pellon Bannatyne, said that Spanish bank shares had fallen in line with French bank shares which had dropped because of "their exposure to Greek debt". She said: "French banks are being attacked so strongly that this has spread via falls throughout the European banking sector." In Paris, shares in Societe Generale, were lost 13.1 percent, having dropped by over 20 percent at one point over concerns over its exposure to Greek debt. In London afternoon trading the price of shares in Standard Chartered bank was showing a loss of 6.34 percent, Barclays was down 6.30 percent, Royal Bank of Scotland was down 5.5 percent and HSBC was down by 4.11 percent. In Madrid, stocks in Santander bank were down 7.13 percent and BBVA was down by 6.35 percent Italy's second-biggest lender, Intesa Sanpaolo, fell 13.72 percent. On Wall Street, shares in Bank of America were down 7.4 percent in afternoon trading. The plunges came a day after the head of the European Central Bank Jean-Claude Trichet made public in the bluntest terms that he had told Italy and Spain what they had to do in return for ECB support for the eurozone system. The US Federal Reserve then took action mainly at supporting the US economy and warding off the threat of a double dip recession by giving exceptionally revealing information that it expects it will keep interest rates at very low levels for about two years. Actions by the ECB, principally the resumption of purchases of bonds issued by eurozone countries in distress, paid dividends initially, when European markets firmed and Italy was able to sell debt at sharply reduced rates. The positive mood on Tuesday had spilled over into Asia earlier on Wednesday. Tokyo rose 1.05 percent, Sydney added 2.64 percent and Seoul gained 0.27 percent. Hong Kong meanwhile jumped 2.34 percent, bouncing back after a disastrous showing on Tuesday when it lost 5.66 percent. Shanghai gained 0.91 percent. Gold prices hit a new record high near $1,800 per ounce on Wednesday, as global economy concerns and tumbling stock markets boosted demand for the safe-haven metal, traders said. Gold rallied as high as $1,797 an ounce in late afternoon trading on the London Bullion Market, extended its recent record-breaking run. It closed at $1,772 compared to $1,736 on Tuesday.

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