5:44 AM
freedownloader
Market Data
Last Updated at 12:43 GMT
| Dow Jones | 11444.61 | Up | 60.93 | 0.54% |
| Nasdaq | 2532.41 | Down | -23.98 | -0.94% |
| FTSE 100 | 5164.54 | Down | -82.45 | -1.57% |
| Dax | 6097.60 | Down | -138.56 | -2.22% |
| Cac 40 | 3221.82 | Down | -56.74 | -1.73% |
| BBC Global 30 | 5200.82 | Down | -44.90 | -0.86% |
European stock markets have given up early gains, which had been triggered by the European Central Bank saying it intended to buy up government debt.
Spanish and Italian markets jumped in early trading before slipping back, while major European indexes slid sharply in mid-morning trading.
Markets tumbled last week, forcing the ECB to intervene to address concerns the debt crisis is spreading.
Yields on Spanish and Italian bonds fell sharply after the bank's move.
The yield on Spanish 10-year bonds - an indication of the risk associated with lending Spain money - fell from more than 6% to about 5.2%. Yields on Italian bonds fell by a similar amount.
"Thanks to the ECB's intervention, [yields have] collapsed dramatically. I can't remember the last time I saw such a big move down," said Louise Cooper at BGC Partners.
Stock market investors appeared to be less enthusiastic about the ECB's bond purchases, as they continue to worry about the US economy following Friday's downgrade of US debt by ratings agency Standard and Poor's.
“Start Quote
From the sidelines, many voices say that the answer to all of this is to launch a eurobond that would essentially turn nation's debts into common European debt. But in order to get close to selling this idea to the German public, the weaker countries would have to agree to a massive loss of sovereignty. Germany, France etc. would essentially want to manage the tax and spending of countries like Greece and Italy.”
In London and Paris the FTSE 100 and Cac 40 indexes lost almost 2%, while Frankfurt's Dax was down almost 3%.
Earlier, Asian shares had fallen due to that downgrade of US debt.
Japan's Nikkei and Hong Kong's Hang Seng indexes lost 2.2%, while South Korea's Kospi dropped 3.8%.
Last week saw trillions of dollars wiped from the value of global markets, with the Dax losing about 13% of its value, the FTSE 100 dropping 10% and the Dow ending the week 5.8% lower.
On Sunday, the ECB indicated that it would start buying the bonds of eurozone governments, hoping to instil confidence that some of its biggest economies would not default on their debt obligations.
Bonds are essentially IOUs issued by governments, or companies, to raise cash. Governments issue new bonds to help pay maturing bonds, which is why it is so important that investors continue to buy them - if they do not, governments are unable to pay their outstanding debts.
View from the trading floor
On days like this, blood pressure, adrenalin and voices can rise dramatically.
That's been the case so far today as the FTSE has gone from badly down to solidly up to dramatically back down again.
I gauge the intensity of trading by the number of men on their feet shouting into their phones.
By that yardstick, the market - like a flock of swallows - could be about to turn in one direction or the other and take the whole gang with it.
Lunch here is not just for wimps but worse - for those who aren't busy.
Not busy equals no money. No money equals no house hunting in Surrey or car buying with HR Owen.
On days like this, reputations and millions are made and shed on trading floors.
In a separate statement, the G7 group of developed countries said members were "determined to react in a co-ordinated manner" to preserve financial stability.
Analysts were mixed in their reaction to the ECB's move, and said the markets would be hoping to see more action from European policymakers.
"The markets are looking for a concrete plan out of Europe and the US in terms of how they are going to deal with their deficits and those plans need to be implemented," said Richard Hunter at broker Hargreaves Lansdown.
"Until the market can get comfort on these matters, there is going to be more volatility."
The intervention by the ECB is seen as a short-term measure to help calm stock markets, but what investors want to see most of all is highly-indebted countries reducing their levels of debt, by spending less and raising more in revenues.
On Friday, Italian Prime Minister Silvio Berlusconi announced plans to balance the country's budget by 2013, a year earlier than planned, while Spain has also promised to speed up cost-saving measures.
“Start Quote
Many will see the ECB as taking a serious credit risk in bailing out two financially over-stretched governments and as behaving contrary to the rules of prudent central banking”
S&P's downgrade of US debt has also underminded investors' confidence.
"The ratings downgrade has been an unprecedented event," said Alvin Liew of UOB Bank in Singapore.
Standard & Poor's cut the US's top-notch AAA rating for the first time, citing concerns about the size of the country's budget deficit and the acrimonious and protracted battle in Congress to raise the country's debt ceiling at the eleventh hour. It has graded the US at AA+.
The fear for many investors is that the US economy will slow further, and even enter a double-dip recession.
This in turn would hurt Asia, which relies on the US, the world's biggest economy, to buy billions of dollars of exports every month.
It would also hamper efforts of governments to reduce their debt load, as it would cut tax revenues.
Click to play
BBC correspondents assess the financial markets
The downgrade was heavily criticised by the US administration, with Treasury Secretary Timothy Geithner telling NBC news S&P had shown "terrible judgement" and a "stunning lack of knowledge about basic US fiscal budget maths".
But China, which is the world's biggest investor in US debt, has told Washington to address its high levels of debt rather than blaming S&P.
An editorial in Monday's China People's Daily newspaper, the mouthpiece of the Chinese Communist Party, called on the US not to "become blind to the great risks that a weak greenback could pose to the world's fragile economic recovery by lifting dollar-denominated commodities prices".
"It is time for the US to tighten its belt and solve its structural problems, in order to resume its reputation and restore world confidence," the paper said.
Fears of renewed global slowdown were reflected in the price of gold and oil.
Gold, which is seen as a safe investment in times of economic uncertainty, jumped to a new record high of $1,706 an ounce on increased demand.
Meanwhile the price of oil slipped further, reflecting concerns that weak global growth could lead to a fall in demand. US light crude fell 3.3% to $83.59 a barrel, while Brent crude lost 3.4% to $105.96.
"There are few places you can obviously hide," said Greg Gibbs of RBS in Sydney. "And the ones that you can hide in are doing very well. Gold is the beneficiary because there is no central bank to sell it."
Posted in: news
0 comments:
Post a Comment