Markets slump on economy and debt fears

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Markets slump on economy and debt fears

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Another black Monday for the financial markets with share prices and the euro tumbling in value.

As well as fears of recession, investors are worried about the euro zone’s ability to solve its debt crisis.

Friday’s dreadful US jobs figures did not help and there are legal moves in Germany to prevent Berlin contributing to EU bailouts of Greece, Ireland and Portugal.

Analyst Robert Halver of Baader Bank in Frankfurt said: “We still have a political crisis, in the US as well as Europe. More and more voices in Europe and within the German government are saying that Greece shouldn’t be a member of the euro zone any longer. So, we can expect some major political mud-slinging over this issue and not many positive things this week – no clarity at all.”

European bank shares have been hammered because of the losses they face over money they have loaned to euro zone countries and a multi-billion-dollar US government lawsuit accusing some of them of misrepresenting the value of sub-prime mortgages when they sold securities linked to those mortgages.

The region’s banks have lost a third of their value since this time last year and are now at their lowest in 29 months.

“The chances of a near-term recovery remain slim as euro zone debt concerns, structural reform and a lawsuit for allegedly mis-selling mortgage debt all weigh heavy on the sector,” Manoj Ladwa, senior trader at ETX Capital said.

Wall Street is closed today for the Labor Day public holiday. There was a sharp sell off of shares there after data on Friday showing US employment growth halted in August; that fuelled concerns that the world’s biggest economy is slipping back into a recession.