Stocks plunged at great speed in Europe and on Wall Street yesterday led by bank shares amid new concern over Greece, and talk of danger for France’s credit rating which was immediately denied.
The slump of up to six per cent and more than four per cent on Wall Street, coupled with a record rise of gold, came only a day after markets soared on strong signals by the US Federal Reserve that it would hold low interest rates for two years
The stocks slump marked a sudden switch from a modest rally in early European trading on emergency action by the US and European central banks to fight the fires of debt and economic slowdown eating ever deeper into confidence.
In foreign exchange deals, the dollar steadied against the euro, after sliding earlier on the Federal Reserve news.
The European single currency dipped to $1.4325 from $1.4374 in New York late on Tuesday.
In late afternoon stock trading, Frankfurt’s DAX index dropped 4.47 per cent to 5,652.59 points and Paris’ CAC 40 dropped 4.30 per cent to 3,039.62 points, while in Milan the FTSE Mib fell 4.42 per cent to 15,027 points.
London’s benchmark FTSE 100 index was down 0.96 per cent, also hit by news that the Bank of England has downgraded its 2011 British economic growth forecast.
In the United States, in morning trading, the Dow Jones Industrial Average fell more than 4.0 per cent, the broader S&P 500 index was down 3.5 per cent and the Nasdaq dropped 3.4 per cent.
Shortly before Wall Street opened, banking stocks turned the European rally into a rout, apparently on a mixture of factors: renewed concerns about Greece after the finance minister made comments on procedures for the eurozone rescue bond swap, concern about France’s credit rating and rumours France might increase taxes on banks.