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Pensions bear brunt as markets plummet

PENSION holders were the biggest losers after a day of carnage on the international markets.

Hundreds of billions were wiped off the value of pension funds as all the main European and US markets crashed ahead of fears of a second economic meltdown.

However, the debt crisis holds a silver lining for homeowners.

Mortgage holders will be spared mortgage increases for up to a year as it looks increasingly likely that interest rates will be on hold into 2013.

The European Central Bank (ECB) left its key interest rate unchanged and gave no signal of an imminent rise at its monthly meeting in Frankfurt.

But all of the European markets opened significantly lower this morning, falling to their lowest levels in more than a year.

London's FTSE tumbled by 2.5pc, the DAX was down almost 4pc and Paris dropped by just over 3pc.

Investors are simply not convinced by government measures to stem the debt crisis in the Eurozone.

The plunge today follows the biggest losses recorded on Wall Street since 2008, slumping to 4.3pc.

Yesterday's massive fall was a signal of the withdrawal of optimism, of any hope that the global market would regain ground.

The market was in such turmoil that some banks started charging people a fee for accepting their deposits.

Bank of New York Mellon said it would charge clients a fee for leaving money for safekeeping.



Crucial

Investors took fright over the US economic recovery ahead of Friday's release of crucial jobs figures for July, which often set the tone in markets.

Many were also rattled by the lack of agreement in Europe about debt and how to stabilise the euro.

The ECB intervened in the bond markets for the first time in two years as the bank bought up Irish and Portuguese bonds.

And ECB president Jean-Claude Trichet outlined that the market turmoil engulfing the eurozone had effectively ruled out another rate rise for a year.

European Commission President Jose Barroso sought more firepower for the euro region's rescue fund and rapped the "undisciplined communication" that has propelled Italy and Spain deeper into the debt crisis.

It now looks likely that a fresh EU summit will be needed to help resolve mounting problems for Italy and Spain.

Economists believe that the rescue fund needs to be increased to something that's 'European size' which would be approximately €2 trillion and that EU leaders are not taking action soon enough.

Meanwhile, gold hit a new high as investors fled for the only safe havens available including Swiss francs and US treasury bonds and oil dropped by 10pc within the week as investors believe there will be less demand if a double dip recession takes hold.

Conversely, in somewhat positive news for Finance Minister Michael Noonan, Irish bond prices bucked the bond market trend as borrowing costs fell to levels not seen for months.

Investors are placing bets that Ireland will not default on the loans as the Government has so far proved it has followed the ECB-IMF requirements.

clairemurphy@herald.ie


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