Bold action by government worldwide to counter a financial sector meltdown has failed to boost investors confidence and the bumpy ride continues for stock markets. European shares tumbled hard and fast, ending the session down 6.5 percent.
London suffered worst with the FTSE 100 losing 7.2 percent, but the other major markets – Frankfurt and Paris – were not far behind. The main Moscow bourse slumped 9.26 percent.
London based analyst David Buik said one problem is that banks are still haggling over the terms of government bailouts: “I’d like to see the colour of the government’s money, both in this country and in the United States and in Europe. I want to see it popped into the respective banks. Let’s get the show back on the road. At the moment, we’re still at the negotiating period and nobody is going to start lending money in any meaningful way.”
The markets are reacting to the fact that even if a banking sector collapse has been averted, a recession has not. That was underlined by very weak sales by US retailers last month. Focusing afresh on recession fears, investors are selling shares and opting for so called safe-havens such as gold and government bonds.