US stocks suffer worst slump since crisis of 2008
'Double-dip' recession fears prompt third day of sell-offs in the States
Shares on US markets plunged last night in the biggest slump since the financial crisis of 2008, despite an attempt by US President Barack Obama to bring the instability to an end.
US markets ended down over 6pc in the biggest drop of the current crisis as investors dumped stocks from virtually every industry. Fears are growing that further losses will pile up today as concerns grow that the US could enter a so-called "double-dip'' recession, an event which would slash growth for economies across the world, including Ireland.
The key event today will be a statement from Ben Bernanke, the chairman of the Federal Reserve, who has already engaged in two rounds of printing money, a process known as quantitative easing.
Banks in particular were impacted with Bank of America plunging by 22pc, as investors got nervous about holding shares even in large companies. Bonds on the other hand rose in value as investors fled for safe-haven assets, among them swiss francs.
European markets slid 4.1pc, the most in more than two years. However, borrowing costs did fall as the ECB intervened to shore up Italy and Spain. Ireland benefited from this with its borrowing costs falling below 10pc.
Mr Obama, breaking his silence on the downgrade, said the main obstacle facing the US was a "lack of political will in Washington" to solve the country's problems.
Mr Obama and markets were reacting to the downgrade on Saturday morning of the United States to AA+.
It has held the higher rating of AAA since World War II.
The three-day slide in US markets of about 10pc was the worst since November 2008. The gauge has plunged about 16pc since July 22.
In Ireland, key names dropped hugely. Elan dropped 8.9pc, C&C was down 6.1pc, Kerry was down 4.4pc. and Ryanair slipped 4.2pc.
Banks overseas tumbled as much as 11pc as a group, reaching the lowest level in two years. Bank of America, Citigroup and Genworth Financial lost more than 14pc to lead the declines. Goldman Sachs sank 8pc to $115.23.
In Europe, traders estimated the ECB bought about €2bn in Italian and Spanish debt after it agreed on Sunday to broaden its controversial bond-buying program for the first time to include the bloc's third- and fourth-biggest economies.
After a rare Sunday night conference call, the ECB welcomed announcements by Italy and Spain of new deficit-cutting measures and economic reforms as well as a Franco-German pledge that the eurozone's rescue fund would take responsibility for bond-buying once it is operational, probably in October.
Mr Obama admitted the problems in the world's largest economy, but said at a White House press conference that the nation's economic problems are "solvable" with enough political will.
Mr Obama told reporters that he hoped the downgrade move would give lawmakers a new sense of urgency to tackle the nation's deficit challenge in the long run.
No matter what the credit rating agencies would comment, the United States had always been and would always be a triple-A country, Mr Obama claimed.
"The markets continue to reaffirm our credit as among the world's safest. Our challenge is the need to tackle our deficits over the long term," he said.
The United States received a downgrade from S&P "not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system's ability to act," he explained.
Investors are now looking to a meeting of the Federal Reserve today for signs financial markets can be soothed.