World stock markets mostly fell yesterday after the economic outlook in Germany soured sharply, with bank shares in focus after Moody’s downgraded some of the biggest names, including HSBC.
Europe’s main stock markets closed lower, mirroring losses in Asia in the wake of weak manufacturing data from China, but US stocks rebounded.
Spanish and Italian bonds wavered as leaders from Spain, France and Germany met in Italy to voice confidence that the eurozone can move beyond its troubles through closer integration and with growth measures.
At the close in Europe, the benchmark FTSE 100 index dropped 0.95 per cent to 5,513.69 points.
In Frankfurt, the DAX 30 dropped 1.26 per cent to 6,263.25 points, while in Paris the CAC 40 slid 0.75 per cent to 3,090.90 points.
But Madrid’s IBEX 35 jumped 1.52 per cent to 6,876.30 points after Spain announced late on Thursday that its crisis-torn banks would need up to €62 billion to survive a severe financial slump, far less than the maximum foreseen in a eurozone rescue deal.
In midday trade on Wall Street, the Dow Jones Industrial Average was up 0.52 per cent, the S&P 500 gained 0.31 per cent, while the tech-rich Nasdaq rose 0.65 per cent.
In foreign exchange deals, the euro edged up to $1.2546 from $1.2543 late on Thursday in New York, while the dollar rose to 80.49 Japanese yen from 80.26 yen.
Data showed that the debt crisis had pushed business confidence in Germany, Europe’s biggest economy, to the lowest level for more than two years. But the health of 15 of the world’s biggest financial institutions has also been called into serious question after Moody’s downgraded their credit ratings, citing heavy risk exposure and the eurozone crisis.
Meanwhile commodity prices slumped this week, with Brent oil crashing to 18-month lows and metals tumbling, as more dark clouds appeared over an already troubled global economy.
Brent crude oil dropped under $90 a barrel for the first time since December 2010 on weak demand expectations for crude caused by the eurozone debt crisis and weakening growth in the US and China, analysts said.
Brent North Sea crude slid to $88.49 a barrel yesterday, while New York’s main light sweet crude contract fell to an eight-month low of $77.56 a barrel.
Dimming hopes for stronger global economic growth and the United States’ persistently brimming stockpiles pushed crude oil prices sharply lower on Thursday, with both major benchmarks losing more than 3.7 per cent. Brent on Thursday also went under $90 for the first time in 18 months.
“The slump in oil prices results from faltering global demand and growing fears of an escalation of the eurozone crisis,” said Andrew Kenningham, a senior economist at Capital Economics research group.
By late yesterday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in August plunged to $90.62 a barrel from $97.57 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate (WTI) or light sweet crude for August stood at $79.39 a barrel compared with $83.92 for the expired July contract a week earlier.