Arab Today, arab today eurozone crisis drives down stocks before g8
Last Updated : GMT 21:25:08
Arab Today, arab today
Arab Today, arab today

Eurozone crisis drives down stocks before G8

Arab Today, arab today

Arab Today, arab today Eurozone crisis drives down stocks before G8

London - AFP

World stock prices fell on Friday and the euro hit yet another four-month low point, hit by a ratings downgrade for Greece and warnings for 16 Spanish banks, before a key G8 meeting. In early morning deals, London\'s benchmark FTSE 100 index dropped 1.02 percent to 5,284.09 points, Frankfurt\'s DAX 30 lost 0.66 percent to 6,269.64 points and in Paris the CAC 40 shed 0.82 percent to 2,987.24. Madrid\'s IBEX-35 index was down 0.19 percent at 6,526.9 points, despite an attempted rebound, but Bankia shares surged as the financial sector staged a dramatic recovery despite the downgrade news. The European single currency tumbled as low as $1.2642 to reach a level last seen on January 16. It later stood at $1.2687. Stocks in Asia were weak, and the Tokyo market ended with a fall of 2.99 percent on the Nikkei 225 index. Seoul plummeted 3.40 percent, or 62.78 points, to 1,782.46 and Sydney dived 2.67 percent, or 110.9 points, to 4,046.5, its biggest fall in eight months. On Wall Street, the Dow Jones Industrial Average ended with a fall of 156.06 points, or 1.24 percent, to finish at 12,442.49. Later on Friday, world leaders will gather at Camp David for a two-day summit with the focus on Greece amid concerns it could leave the eurozone with wildly uncertain repercussions for the global economy. \"Fears that Greece could collapse at any moment, downgrades for Spanish banks, reports of runs on one or two banks in those countries ... It could well be a tough few days at the G8,\" said analyst Mike Mason at Sucden Financial Private Clients. Moody\'s slashed the ratings of 16 banks in Spain by between one and three notches, citing \"renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment\". It also blamed the reduced creditworthiness of the government. Fitch meanwhile downgraded Greece\'s credit a notch, to CCC from B-, saying it was vulnerable to default amid political uncertainty over Athens\' commitment to a crucial bailout plan and its possible exit from the eurozone. The run-up to the G8 has witnessed a marked deterioration in the eurozone\'s long-running debt crisis that has already resulted in massive bailouts for Greece, Ireland and Portugal, and now appears to be circling Spain. \"There is little respite in the eurozone banking crisis which is having spill-over effects on the global economy and global financial markets,\" added VTB Capital economist Neil MacKinnon. \"Investors are worried about deposit-runs in the eurozone banking system and the \'flight of capital\' is pushing US, UK and German bond yields lower.\" Germany\'s 10-year borrowing rate fell to a record low level of 1.399 percent in early eurozone bond trading on Friday in a climate of alarm over the state of Greece and banks in Spain. The German 10-year Bund is the benchmark bond in the eurozone, and it rose as funds were moved to safe havens, thereby depressing the rate from 1.411 percent on Thursday. Europe\'s main markets had tumbled on Thursday on the back of ongoing uncertainty in Greece, which was forced to call a new election earlier this week after an inconclusive vote against harsh austerity measures. \"European stock markets were hammered again on Thursday, with the financial sector bearing the brunt of the selling pressure,\" said Capital Economics analyst Jonathan Loynes. \"The trigger for the sell-off was the news that the European Central Bank has suspended its lending to some Greek banks at a time when a growing number of depositors are withdrawing their money ahead of a potential exit of Greece from the eurozone. \"Not surprisingly, concerns are growing that bank runs could soon become a regular feature in other troubled countries in the region deemed at risk of following Greece\'s lead.\" In Madrid on Friday, the biggest gainer was surprisingly the nation\'s state-rescued lender Bankia, whose stock soared by almost 20 percent as the Spanish financial sector staged a dramatic recovery. Just a day after Bankia\'s stock was hammered by a hotly denied report of a run on its funds, and hours after Moody\'s Investors Service slashed its rating of most of the sector, the banks made a comeback. Bankia leapt 19.55 percent to 1.70 euros while the eurozone\'s number-one bank by market capital, Santander, surged 3.49 percent to 4.60 euros and rival BBVA advanced 4.20 percent to 4.967 euros. \"The stand-out this morning has been the huge rebound in Bankia\'s share price, up almost 20 percent,\" noted analyst Mike McCudden at online brokerage Interactive Investor. \"Talk of a run on the bank by depositors punished the shares hard yesterday ... but the reality is that the recent selling was maybe too much, too quickly.\" The eurozone crisis has meanwhile pushed Facebook\'s upcoming Wall Street debut -- due later Friday -- into the shade, dealers noted. \"That much-hyped Facebook IPO is looking like little more than a sideshow at the circus as all eyes are now squarely on the future of the eurozone,\" added McCudden.

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