European markets were in negative territory for much of this morning as investors continued to shy away from stocks. However, many indices are now rebounding.

The Dublin market was down by over 2.5 per cent earlier today but bounced back later in the day and was up 20.51 points at 2416.24 by 1.10pm.

The FTSE 100 Index rose 0.1 per cent to 5,076.14 at lunchtime. in London after earlier sinking as much as 5.5 per cent. But it has since fallen by 0.4 per cent to 5,049.03 at 12:52 pm. The DAX in Germany was down 1.6 per cent while the CAC40 in France was up 0.786 per cent.

The FTSEurofirst 300 index of top European shares was down 0.1 per cent at 934.94 after an 888.11 low.

Earlier today Japan’s Nikkei average tumbled at one point more than 4 per cent in heavy volume, posting the biggest one-day fall since the March earthquake.

The Nikkei closed down 1.7 per cent today, having trimmed losses on bargain hunting after the index tumbled more than 4 percent in the wake of a plunge on Wall Street and a downgrade of US sovereign debt.

South Korea’s Kospi closed down 3.64 per cent and Hong Kong’s Hang Seng declined 2.8 per cent.

The mood was exacerbated by news that China’s consumer price inflation rose to 6.5 per cent in July from June’s 6.4 per cent, topping market forecasts for 6.3 per cent and fuelling fears of more tightening in the world’s second-largest economy.

Yesterday, world markets wrote $2.5 trillion (€1.75 trillion) off the value of global stocks.

A sell-off of banking stocks led US markets downwards, resulting in the Standard & Poor’s 500 Index worst day since December 2008, with every stock in the benchmark index ending in negative territory.Bank of America closed down 20 per cent, while Citigroup fell 16 per cent.

The cost of borrowing by Italy and Spain has again fallen today as the ECB bond-buying programme continues. The yield on 10-year Italian bonds has dropped to 5.11 per cent, while the Spanish rate has declined to just over 5 per cent.

Ireland’s 10-year bond yield is at 9.90 per cent after falling below the 10 per cent mark yesterday for the first time since April.

Gold hit a record $1,778 an ounce today in its biggest three-day rally since the depths of the financial crisis in late 2008, and its value has risen by about 8 per cent this month as investors seek safer havens.

Oil slumped to its lowest level in six months today, briefly dipping below $100 on
mounting worries. It fell by as much as $5 to $98.74 a barrel but has since recovered to $103.14.

The fallout from the withdrawal of the top AAA credit rating from the United States pushed world stocks to their lowest level in almost a year. Investors moved money to safer havens such as gold and Swiss francs.

The sell-off of shares has wiped $3.4 trillion off the value of world stock markets since July 29th, the equivalent of the gross domestic output of Germany.

Stocks declined after Standard and Poor’s followed its downgrade of the US last Friday by cutting the ratings of state-backed Fannie Mae, Freddie Mac and other lenders with a “direct reliance on the US government”.

There are strong rumours circulating that Federal Reserve chariman Ben Bernanke may make an official statement before Wall Street opens at 2.30pm Irish time. Federal Reserve policy makers are holding a one-day meeting later today in the US. Speculation has grown that the Fed will initiate a third round of quantitative easing (QE) to help the US economy.

President Barack Obama yesterday blamed S&P’s downgrade on Washington political gridlock and said he would offer recommendations on how to reduce federal deficits. “No matter what some ratings agency will say, we will always have a triple-A rating,” he said.

Elsewhere, ECB president Jean-Claude Trichet has defended the decision to buy the bonds of Italy, the world’s third largest issuer of debt, and Spain and deviate from its rules. “Our decisions in the euro zone did not have the intended effect,” he said in an interview.

Director at Dublin-based bond market specialist Glas Securities Michael Cummins said that in the absence of a long-term solution, buying Italian and Spanish bonds was “merely a Band-Aid solution”.

 

Source Irish Times / Reuters

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