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Shares plunge on euro zone debt crisis and recession fears

Shares plunge on euro zone debt crisis and recession fears
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Fear stalked the world’s financial markets on Wednesday slashing share prices.

The FTSEurofirst 50 index of leading European stocks closed down over six percent.

Fresh worries about Europe’s debt problems drove the sell off, coupled with continuing fear of another global recession.

France was the focus on rumours about trouble at French banks which hammered their shares. The finance ministry and the three major ratings agencies had to deny Paris’ AAA rating may be at risk.

Commenting on the uncertain outlook, investment fund manager Olivier de La Ferriere of KBL Richelieu in Paris, said: “Despite Tuesday’s rise, the market remains very volatile. That is because growth will stay weak. The Federal Reserve admitted that. So, in such an uncertain environment we think that investors will continue to be extremely nervous despite the Fed’s declarations which the market had anticipated.”

The volume of shares being traded has skyrocketed as investors sold off.

The optimism from the Federal Reserve saying it would keep US interest rates low for two years quickly evaporated.

Gold hit fresh record highs as the stock markets resumed their declines. US COMEX gold futures for August delivery briefly topped $1,800 an ounce before pulling back.

The precious metal has rallied nearly seven percent so far this week after a last Friday’s downgrade to the US credit rating and is up 20 percent since June.