World stock markets rattled by EU debt crisis

World stock markets rattled by EU debt crisis

World stock markets remained volatile as investors grew increasingly convinced that Greece would default on its debts, an event that economists say has the potential to worsen a global downturn.

By (AP)

Published: Mon 26 Sep 2011, 3:05 PM

Last updated: Tue 7 Apr 2015, 5:57 AM

Oil prices fell below $79 per barrel while the dollar strengthened against the euro but was lower against the yen.

Stocks were mixed in early European trading. Britain’s FTSE 100 fell 0.5 percent to 5,040.61. But Germany’s DAX gained 1.6 percent to 5,280.93 and the CAC-40 in Paris gained 0.9 percent to 2,836.70. Wall Street was headed higher, with Dow Jones industrial futures up 0.2 percent to 10,716. S&P 500 futures rose 0.4 percent at 1,134.

Negative sentiment was most intense in Asia, where markets closed sharply lower. Japan’s Nikkei 225 index slid 2.2 percent to 8,374.13 — its lowest close since April 2009. South Korea’s Kospi fell 2.6 percent to end at 1,652.71 and Hong Kong’s Hang Seng lost 1.5 percent to 17,407.80. Australia’s S&P/ASX 200 receded 1 percent to 3,863.90.

“People expected over the weekend that European finance ministers and IMF officials would probably announce some concrete plans to stabilize the eurozone. But it came out empty again,” said Jackson Wong, vice president at Tanrich Securities in Hong Kong.

“Everything is so negative right now. People are waiting for a positive catalyst to get back into the market,” Wong said. “The road ahead is very unclear.”

A stubbornly strong yen weighed on Japan’s export sector because it makes Japanese goods more expensive abroad. Consumer electronics giants Panasonic Corp. fell 4.1 percent and Sharp Corp. lost 4.9 percent. Isuzu Motors Ltd. tumbled 4.4 percent.

Elpida Memory plummeted 6 percent after the chipmaker’s South Korean rival Samsung Electronics Co. said it had started mass production of new flash memory chips used in tablets and smartphones, Kyodo News Agency reported. Samsung rose 2.2 percent.

Thailand’s SET index was down 6.8 percent to 892.64. Benchmarks in Singapore, Taiwan, Indonesia, the Philippines and New Zealand also closed lower.

Mainland China’s benchmark Shanghai Composite Index dropped 1.6 percent to 2,393.18 — its lowest close in 14 months. The smaller Shenzhen Composite Index lost 1.6 percent to 1,043.47. Shares in gold and insurance companies weakened.

“The investors are so worried over the market, and the losses today are also due to the situation abroad. The market will keep on being unstable and difficult to rally in the short term,” said Cai Dagui, an analyst at Ping’an Securities, based in Shenzhen.

Ping An Insurance (Group) Co. of China plunged 9.6 percent due worries over its exposure to European investments. Lao Feng Xiang Co. Ltd., a major gold retailer, slipped 5.3 percent.

Investors have been waiting in vain for news that Greece will receive the next installment of a bailout package in time to avoid defaulting on its debt next month.

If it defaults, banks throughout Europe are likely to lose the money they invested in Greek bonds — an event that could ultimately lead to a recession in Europe and worsen economic problems in the U.S.

Fears about Europe’s debt increased Friday on news that Moody’s Investors Service had downgraded its ratings of eight Greek banks by two notches.

Intensifying the anxiety: finance ministers from the 20 biggest emerging and developed nations pledged Friday to do whatever is necessary to preserve stability in banking systems and financial markets — but offered nothing specific. The International Monetary Fund on Saturday also pledged to deal decisively with the crisis — but without announcing a new plan of action.

Gold shares slumped as investors sold off holdings in the precious metal to raise cash. Hong Kong-listed shares of Zijin Mining, China’s largest gold miner, plummeted 10.8 percent. Australian gold miner Newcrest Mining Ltd. plunged 8.5 percent.

“Gold’s sharp decline and extreme volatility in recent weeks has raised questions about it retaining its traditional role as a safe-haven asset and the sustainability of its multiyear rally,” Credit Agricole CIB wrote in a report.

On Wall Street on Friday, the Dow Jones industrial average rose slightly — but closed the week down 6.4 percent, its worst showing since the depths of the financial crisis three years ago.

In currencies, the euro fell to $1.3428 from $1.3467 late Friday in New York. The dollar fell to 76.33 yen from 76.72 Japanese yen.

Benchmark oil for November delivery was down $1.63 to $78.24 per barrel on the New York Mercantile Exchange. The contract fell 66 cents to finish at $79.85 per barrel on the Nymex on Friday.

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