Stock markets fall again as IMF chief warns of crisis

• FTSE 100 opens more than 100 points lower • Banks and miners see big falls, RBS down 7.4% • Lagarde calls for recapitalisation of Europe’s banks • Weak US jobs data still worrying traders Fears of a new global recession sent stock markets falling sharply across Europe and Asia on Monday morning, after International Monetary Fund chief Christine Lagarde warned that the world economy is on the brink of a new crisis. In London, the FTSE 100 fell 101.33 points at the start of trading to 5190, down 1.9%. Germany’s Dax fell 2.3%, and France’s CAC index dropped 2.5%. There was also a rush to dump shares in Asia, where Japan’s Nikkei closed 1.86% lower at 8,784.46 points and South Korea’s Seoul Composite index slid by 4.39%. This latest selloff came after Lagarde said the risk of a new financial crisis had grown in recent weeks. “We see that there has been, particularly over the summer, a clear crisis of confidence that has seriously aggravated the situation,” she told Germany’s Spiegel . “Measures need to be taken to ensure that this vicious circle is broken.” Lagarde warned that Europe’s banks needed to be recapitalised, to give them protection from losses on their reserves of sovereign debt. The former French finance minister also argued that Europe needs to implement closer fiscal union and speed up its economic growth – which has almost ground to a halt. “The sovereign debt issue weighs on the confidence that market players have in European banks,” Lagarde said. Financial stocks and miners led the fallers in London. Royal Bank of Scotland slid 7.4% to 22.2p, Barclays fell 5.5% at 155p, and Antofagasta and Kazakhmys both fell by 4%. The UK banks were buffeted by uncertainty over whether they will be forced to ringfence their retail and investment banking operations . The rush from equities into “safe-haven” government bonds pushed the interest rate on German Bunds to just 1.935%. Concerns over the weak US jobs market also dogged investors, following the shock news late last week that no new jobs were created in America last month . Chris Weston, institutional trader at IG Markets, said Friday’s disappointing non-farm payroll numbers continued to cast a shadow. “That US non-farm payroll reading certainly left traders with little to celebrate on Friday, pushing markets on both sides of the Atlantic sharply lower as a result. This has certainly set the pace for Asian markets too and with Wall Street closed today for Labor Day, it seems unlikely that there will be much appetite to start taking on any risk just yet,” said Weston. “Even those who thought a dire jobs report would pave the way for another round of cheap money in the form of QE3 seem to be cooling on the idea – or at least any hope that it’ll provide the same shot-in-the-arm response for equity markets.” Stock markets Financial crisis Global recession Banking Christine Lagarde IMF Global economy European banks Europe Graeme Wearden guardian.co.uk

Posted by on September 5, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.