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Markets nosedive on EU, US economy fears

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Markets nosedive on EU, US economy fears


It was a bleak end to a black day on the stock markets.

Wall Street posted its biggest sell-off in two years. The Dow plunged more than four percent while the Nasdaq shed five percent.

The sell-off was prompted by fears America is heading into a second recession. But the euro zone sovereign debt crisis has also spooked investors.

Sam Stovall, Chief Investment strategist for Standard & Poor’s, commented: “Europe is certainly factoring into it, because while most investors believe that Europe can handle a Greek default, as well as, additional debt problems from Ireland and Portugal, it would likely have much more of a problem trying to swallow the debt problems of both Spain and Italy, but it appears as if those two countries are going to need some help as well.”

The European Central Bank has resumed buying government bondsbut some analysts are worried ECB boss Jean-Claude Trichet could push official interest rates up further – increasing pressure on weak economies in the region.

Robert Halver, an analyst from Baader Bank, explained: “We are facing two problems in the euro zone, first of all, our politicians are not able to lead. It is confusing financial markets, that’s the main problem. And the other problem is, we have still no prospective for Spain, for Greece, for Portugal, for Ireland, that’s what’s clearly missing and that’s what’s disturbing… what is a clear sign of weakness for the European stock exchange markets”

With European Commission chief Jose Manuel Barroso warning more action was needed to contain the euro zone crisis, markets from London to Paris and Frankfurt all closed in the red.

Worst hit on Thursday was Milan which dropped more than five percent.

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