US markets plunge on continuing Greek debt concerns

[Zanthorus]

US stockmarkets have plunged in New York as concerns about high levels of European government debt continued to shake investor confidence.

Stocks fell steeply over Greece's debt problems, and falls may have been made worse by computer-driven trade.

At one point the Dow Jones was down by more than 9%, its worst fall since 1987, before starting to recover.

At close in New York the Dow Jones was down about 3.20%, the S&P down 3.24%, and Nasdaq 3.44%.

The BBC's Business Editor Robert Peston said the market panic had been precipitated by "fear of a knock-on from Greece and other European countries on the global financial system".

Jobs report

The tech-based Nasdaq index said it was scrutinising trades made between 2pm and 3pm.

And Procter & Gamble was investigating the fall in its stock at one stage by 37%.

As well as shares falling, bond prices increased and the dollar fell by 6% against the yen.

Oil prices also fell, to levels not seen since February, with benchmark crude losing $2.86 to settle at $77.11 a barrel in New York.

There will be close attention paid now to Friday's US employment report, showing payroll levels for April, and whether this will calm the markets.

'Panic sell'

There are market worries that Greece may default on its debt and that trouble there could spread to other parts of Europe, including Spain or Portugal.

Investors were disappointed that earlier today the European Central Bank did not take fresh measures, such as buying Greek bonds, to help stop the Greek debt crisis.

"Right now you just have a panic sell," said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.

"It could be a long-term negative for stock market because it could mean the long-term high is in place. It's very likely we've seen the highs for this cycle."

However, others said the stock volatility could have been exacerbated by electronic trading issues rather than worries about Greece.

'Machines took over'

"This is an electronic market where bids can be cancelled at the flick of a button, and everyone cancelled at the same time," said Joe Saluzzi, of Themis Trading in New Jersey.

"We should be down big today, but not 1,000 points. This is an equity market structure issue, there's no major problem going on."

Computer trading is thought to have cranked up the losses, as programmes designed to sell stocks at a specified level came into action when the market started falling.

"I think the machines just took over," said Charlie Smith, chief investment officer at Fort Pitt Capital Group.

"There's not a lot of human interaction. We've known that automated trading can run away from you, and I think that's what we saw happen today."

http://news.bbc.co.uk/1/hi/business/10101581.stm

Looks like the Greek situation is starting to shake things up worldwide.

[Delenda Carthago]

I feel very disapointed by looking at comrades that claim marxists,still,they dont care about economy.

Dear comrade Zanthorus,you said "the greek situation".What is "the greek situation"?How it was made?What is its relation with the worldwide crisis?

[Rakhmetov]

Greece was the birthplace of democracy. Funny how history is cyclical and circular. I have a feeling democracy is going to have a renaissance in Greece.

:cool:

[the last donut of the night]

Greece was the birthplace of democracy. Funny how history is cyclical and circular. I have a feeling democracy is going to have a renaissance in Greece.

:cool:

Sorry to be that guy, but let me remind you guys that democracy never existed in ancient Greece -- unless you count rich slave-owners voting democracy, of course. Also, the belief that democracy was born anywhere, but just in Greece, is an ethnocentric belief that other places couldn't come up with it. In fact, democracy was probably born in small hunter-gatherer tribes thousands of years before Greece.

Sorry Mengitsu, this isn't aimed at you, it's just an observation. But I agree -- maybe soon we'll see real democracy in Greece.

[Zanthorus]

I'm probably not the most knowledgable on this so maybe some other comrade may be able to fill in the finer details but:


Dear comrade Zanthorus,you said "the greek situation".What is "the greek situation"?

Currently Greece's has a national debt which stands at €300 billion euros. It's having difficult paying it back and so they've accepted the €110 billion bailout package from the european union and the IMF. However the condition for being granted the bailout is the imposition of the austerity measures.


How it was made?

When the country switched from the Drachma to the euro in 2002 it made it easier for the country to borrow money which it spent on projects like the olympic games in 2004.


What is its relation with the worldwide crisis?

Because of the unemployment resulting from the downturn more people are out of work on benefits which is making it more difficult for the government to simply unload everything onto the workers through tax rises. The problems have also decreased investor confidence and made it more difficult for other european countries like Spain and Portugal to borrow money.

Also as we can see from this piece, any serious difficulties in Greece is going to have repercussions on the global financial system.

[Zanthorus]

Looks like it's more than just the USA which is having these problems.


Global shares fall on Greece debt worries

Global stock markets have fallen sharply, amid investor fears that Greece's debt crisis could halt the global economic recovery.

In the US, the Dow Jones index fell 0.7%, while France's Cac 40 closed down 4.6%, the UK's FTSE 100 shed 2.6% and Germany's Dax lost 3.3%.

Japan's Nikkei index shed 3.1%, having fallen by 4.1% in morning trading.

Sterling also fell sharply against the dollar and the euro as results poured in from the UK general election.

The pound fell more than 3 cents, or 2.1%, against the dollar, to $1.4633.

Against the euro, it fell by 2.6 cents, or 2.2%, to 1.1478 euros.

The UK election resulted in a hung parliament, which raised concerns among investors that a weak government might not be able to implement policies quickly to reduce the UK's high budget deficit.

However, sterling later bounced back against both the dollar and the euro as talks were due to begin between leaders in an attempt to form a government.

Contagion fear

The continued global turmoil on the stock markets comes a day after Greek MPs approved drastic spending cuts in exchange for an international financial rescue plan, amid violent protests in Athens.

European leaders are meeting in Brussels to finalise details of a 110bn-euro ($139bn; £86bn) loan package to Greece, while the G7 finance ministers have also discussed the Greek debt crisis and its implications for the global economy.

"The reason for today's fall is what everybody knows - Greece," said Hideaki Higashi at SMBC Friend Securities.

"The market is factoring in the possibility that this Greek problem will spread to Spain and Portugal."

Both Spain and Portugal also have high budget deficits and were downgraded by Standard & Poor's credit rating agency last week. There are fears they could be engulfed by the Greek debt crisis.

Cash injection

Among the stock markets in Asia, South Korea's Kospi dropped by 2.2%, while China's Shanghai index fell 1.9%. Shares in Hong Kong, Taiwan and Singapore also fell.

Japan's Prime Minister Yukio Hatoyama said he was "very concerned" by the losses.

The country's central bank said it would inject more than $20bn (£13bn) in short-term loans to commercial banks to boost liquidity.

"The Bank of Japan aims to increase a sense of security in the markets by providing ample funds," said Bank of Japan official Yuichi Adachi.

The BBC's Roland Buerk in Tokyo says the crisis in Europe hurts Japan because its economy has relied on exports for growth.

And as investors flee the euro for currencies perceived to be safer, such as the yen, Japan's currency strengthens, making the products of its companies more expensive abroad, our correspondent adds.

In New York, the Dow Jones share index plummeted 9% at one point before bouncing back to end Thursday down 3.2%.

The BBC's Caroline Hepker in New York says there are rumours that the drop may have been caused by an erroneous "fat finger" trade at a Wall Street bank.

The New York Stock Exchange said it had found no error, but the Securities and Exchange Commission and Procter & Gamble, which saw its shares hit, are reviewing the matter.

http://news.bbc.co.uk/1/hi/business/8666545.stm