World stock markets fell in nervous trade yesterday and the euro hit a new four-month low against the dollar as a downgrade hit 16 Spanish banks ahead of a key G8 meeting, rattling investors.
Shares on Wall Street briefly bucked the trend amid excitement over the social network Facebook’s historic market debut, but later turned lower as the stock listing fell short of expectations.
At the close, London’s benchmark FTSE 100 index of top companies lost 1.33 per cent to 5,267.62 points, Frankfurt’s DAX 30 dropped 0.60 per cent to 6,271.22 points and in Paris the CAC 40 fell 0.13 per cent to 3,008.00 points.
Madrid’s IBEX-35 index was up 0.44 per cent at 6,566.70 points, however, and Bankia shares surged as the financial sector staged a dramatic recovery despite the downgrade news.
But the European single currency tumbled as low as $1.2642 to reach a level last seen on January 16, before recovering to $1.2719 from $1.2693 Thursday.
The dollar dipped to 79.13 Japanese yen from 79.28 yen.
Stocks in Asia were weak and the Tokyo market ended with a fall of 2.99 per cent on the Nikkei 225 index. Sydney dived 2.67 per cent, suffering its biggest fall in eight months, while Hong Kong lost 1.30 per cent and Shanghai was 1.44 per cent lower.
On Wall Street at around 1600 GMT, the Dow Jones Industrial Average fell 0.36 per cent, the S&P 500-stock index sank 0.46 per cent and the tech-rich Nasdaq, where Facebook’s shares now trade, lost 0.86 per cent.
The shares, priced at $38 on Thursday in the largest-ever initial public offering for a technology company, jumped 12 per cent to $42.55 in the opening Nasdaq trades but within minutes fell back to the offering price.
Late Thursday, Moody’s slashed the ratings of 16 banks in Spain by between one and three notches, citing “renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment”.
It also blamed the reduced creditworthiness of the government.
Fitch downgraded Greece’s credit a notch, to CCC from B-, saying it was vulnerable to default amid political uncertainty over Athens’s commitment to a crucial bailout plan and its possible exit from the eurozone.
“Fears that Greece could collapse at any moment, downgrades for Spanish banks, reports of runs on one or two banks in those countries... It could well be a tough few days at the G8,” said analyst Mike Mason at Sucden Financial Private Clients.
Germany’s 10-year borrowing rate fell to a record low level of 1.399 per cent in eurozone bond trading on Friday in a climate of alarm over the state of Greece and banks in Spain, but later rose to 1.427 per cent.