Global markets tumble as finance tax urged by Merkel
STOCK markets tumbled on both sides of the Atlantic yesterday as concerns mounted over the stability of the currency and the inability of Europe's divided politicians to defend it.
German chancellor Angela Merkel led calls for an international financial tax yesterday as a "signal of strength", but stock markets continued to slump from a lack of confidence in the euro.
US stocks dropped sharply last night, driving the Dow and the S&P 500 down more than 3pc and pushing the tech-laden Nasdaq down more than 4pc.
The Dow Jones industrial average fell 376 points, or 3.61pc, to end at 10,068. The S&P 500 slid 43.46 points, or 3.9pc, to close at 1,072. The Nasdaq Composite Itumbled 94.36 points, or 4.1pc.
The FTSE 100 fell by 85 points to 5073 while the Dax index in Frankfurt and the CAC-40 in Paris each fell by more than 2pc.
Irish shares also endured another bruising session yesterday. The ISEQ Overall index fell 96.82 points, or 3.3pc, to 2882.12, its lowest level since February 26 as the banks tumbled and other large companies such as CRH and Kingspan also declined.
Bank of Ireland slid 14pc to 76c as investors sold the right to take part in the rights issue.
The bank's decline took place during heavy trading which saw 43 million shares trade hands.
Rival Allied Irish Banks saw its shares fall 8.7pc to €1.04 as doubts about the bank's chances of selling assets in the US and Poland resurfaced.
Merkel struck a more conciliatory note after her controversial ban on short-selling of bonds, saying she needed "honest" advice as her government pressed for tougher global regulation.
Merkel was speaking ahead of talks involving EU finance ministers in Brussels today.
She is also seeking to reassure German MPs -- who will be asked to support the eurozone's multi-billion bailout fund -- that they would see some extra regulation in return for German money.
Merkel said she has to balance voter concerns with investors' "understandable" desire for profit.
"People are asking, 'What powers do you politicians still have?'" Ms Merkel said. "The Group of 20 nations agreed every product, every actor and every financial centre must in future be regulated. That's what we promised the people. Now, one-and-a-half or two years later, people are asking what happened. At some point we have to deliver," she said.
She said she will lead a campaign for a tax on financial markets at the G20 meeting and called for international support.
"If we don't get honesty, then we might not do the right thing technically, but we will do the right thing politically," Ms Merkel told the financiers.
US central bankers said Europe's debt crisis poses a threat to the US and world economies, as trade shrinks and banks incur losses on European investments.
"A deeper contraction in Europe associated with sharp financial dislocations would have the potential to stall the recovery of the entire global economy, and this scenario would have far more serious consequences for US trade and economic growth," Federal Reserve governor Daniel Tarullo said in testimony to Congress.
But the expected decline in the euro will help the region's economy, according to one analyst.
"The euro depreciation is good news because the rest of the world economy is expanding," said Charles Wyplosz, head of the International Centre for Monetary and Banking Studies in Geneva.
The euro erased an earlier loss versus the dollar on speculation the Swiss National Bank sought to support the franc, prompting traders to theorise that the European Central Bank may do the same for the shared currency.
"Judging by the price action, it looks like the SNB intervened in the market," said Jessica Hoversen, a Chicago- based analyst at the futures broker MF Global Holdings Ltd.
(Additional reporting by Bloomberg)