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Tuesday, 23 July 2019

Eurozone crisis drives world stocks lower despite Facebook frenzy

Global investors show little faith this weekend's G8 summit will quickly quell the turmoil in the eurozone

AFP, Saturday 19 May 2012
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World stock markets fell again in nervous trade on Friday and the euro hit a new four-month low against the dollar as ratings agencies further downgraded Greek and Spanish banks.

Spooked investors showed little faith that the Group of Eight weekend summit in the United States would produce any quick or convincing action that could quell the turmoil in the eurozone.
 
Even the much-awaited largest-ever tech company IPO, Facebook, could not reverse sentiment and very nearly turned into a money-losing flop itself, with underwriters forced to prop the shares up above the $38 initial public subscription price.
 
"There is little respite in the eurozone banking crisis which is having spillover effects on the global economy and global financial markets," said VTB Capital economist Neil MacKinnon.
 
"Investors are worried about deposit-runs in the eurozone banking system and the 'flight of capital' is pushing US, UK and German bond yields lower."
 
"Market confidence continued to erode this week due to events in Europe, including capital flight from Greece and the downgrade of several Spanish banks," said Economists Paul Edelstein and Nigel Gault at IHS Global Insight.
 
"The big question is: will Greece exit (or be jettisoned from) the rurozone? Even if Greece elects a 'pro-bailout' government in June and even if Germany blinks first in the austerity/growth game of chicken, a Greek exit appears likely," they said.
 
That cloud sent shares tumbling and the dollar pushing higher against the euro.
 
In New York the S&P 500 gave up 0.74 per cent for the day, bringing its loss for the week to 5.3 percent. The Dow index of blue chips lost 0.59 per cent, and 3.5 per cent for the week.
 
In Europe London's FTSE 100 index of top companies lost 1.33 per cent; Frankfurt's DAX 30 0.60 per cent, and the CAC 40 in Paris, 0.13 per cent.
 
Madrid's IBEX-35 index was up 0.44 per cent however and embattled Bankia shares surged as the financial sector staged a dramatic recovery despite Moody's downgrade of 16 banks late Thursday.
 
Meanwhile the European single currency tumbled as low as $1.2642 to reach a level last seen on 16 January, before rebounding to $1.2773.
 
Earlier in the day, under the same shadows of slower economic growth and the eurozone crisis, stocks in Asia were weak.
 
The Tokyo market ended with a fall of 2.99 per cent on the Nikkei 225 index. Sydney dived 2.67 per cent, while Hong Kong lost 1.30 per cent and Shanghai was 1.44 per cent lower.
 
"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.
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