Stocks, oil and the euro plunge on fears of global growth slowing
Published 23/09/2011 | 05:00
GLOBAL stock markets, oil prices and the euro plunged last night as fears of a global recession spread. The fall came after data showed growth levels in Germany and France grinding to a halt this month, and China slipping further in an economic slowdown.
Bad news out of the US over the course of yesterday afternoon kicked the third leg out from under the markets and plunged stock markets into the red.
In Europe the French market took the hardest hit with shares down 5.25pc. The index of leading German shares ended the day off 4.96pc. The ISEQ closed down over 3.5pc. A total of £64bn (€73bn) was wiped off the value of Britain's biggest companies yesterday amid a global stock market rout that was fuelled by fears of another world recession.
The FTSE 100 plunged 4.7pc, the biggest one-day drop since March 2009 when traders feared that Barclays was about to be nationalised.
It came after new Purchasing Managers Index (PMI) data showed economic activity in the eurozone as a whole shrank this month for first time in more than two years.
PMI measures activity in the manufacturing and service sectors and are seen as a good gauge of the health of the private sector.
September data released yesterday showed falls in each of the two main economic pillars across the eurozone and most worryingly showed no growth in Germany or France.
Manufacturing output was down for the second month in a row and services fell for the first time since August 2009.
The same data for China showed manufacturing there will shrink for the third month in a row when final figures are tallied for September. It's the longest contraction since 2009.
That dire news worsened after the US markets opened. In the US the latest jobs numbers showed a rise in the number of people signing on for benefits last week and consumer confidence dropped to its worst since June 2009.
It set the stage for huge falls in the markets. Shares and commodity prices plunged as investors bet that the global economy is heading into a slowdown or even a possible recession.
In the US stocks tumbled for a fourth day. The Standard & Poor's 500 Index of shares had lost 7.4pc of their value over the four-day fall.
"I don't know how much further the market can go down," said David Kelly, chief market strategist for JP Morgan Funds in New York.
"The real problem is that policymakers keep on proposing solutions which either won't be implemented or simply do not work. The Fed needs to express confidence on the economy itself."
Oil prices dropped by more than 4pc in London and the price of copper fell to a one-year low. Oil and metals are seen as bets on future growth and fall when investors believe the economy is slowing down.
In currencies the dollar climbed to a seven-month high against most major currencies, and an eight-month high against the euro.
That came as investors ditched risky assets, which are increasingly seen to include the euro, in favour of what remains for many the ultimate safe haven investment. (Additional reporting Bloomberg and Reuters)