Stock markets tumble amid eurozone fears over Italy and Spain

FTSE falls below the 5500 mark after European commission president’s crisis warning and fears of new US recession Stock markets took another tumble on Thursday after the European commission president warned that the crisis in the eurozone was threatening to engulf Italy and Spain. Fears over the health of the global economy, and predictions that America could slide back into recession, also helped to drive the latest bout of heavy selling. The FTSE 100 index fell below the 5500 mark, leaving the blue-chip index firmly on track for its lowest closing level in nearly a year . The worst of the selloff came after commission president José Manuel Barroso called for the eurozone rescue fund to be significantly enlarged. Barroso warned the crisis was spreading and that Europe risked losing the faith of the financial markets. “Markets remain to be convinced that we are taking the appropriate steps to resolve the crisis,” Barroso told European leaders, as he urged them to review “all elements” of the €440bn (£382bn) European financial stability facility (EFSF) and its €500bn replacement , the European stability mechanism (ESM). “We are no longer managing a crisis just in the euro-area periphery,” Barroso said. “Euro-area financial stability must be safeguarded.” Analysts have warned that neither the EFSF nor the ESM has sufficient firepower to handle a bailout of either Italy or Spain. With Italian and Spanish 10-year bond yields above the 6% mark, investors are losing their taste for risk. Gold touched yet another record high, hitting $1.678.31, while the FTSE 100 slumped to 117 points to 5466. “We’re back to worrying about the future of the eurozone and the sovereign debt crisis, and the generally stuttering economy,” said Will Hedden, sales trader at IG Index. European markets were also in retreat, with Germany’s DAX down 1.35%. The FTSEurofirst 300, which tracks the top 300 listed companies across Europe, recorded its lowest level in 11 months. The euro fell sharply against other major currencies, losing nearly 1.5 cents against the US dollar to $1.4170. There was frenzied action on the foreign exchanges after the Bank of Japan intervened to drive down the value of the yen . Jean-Claude Trichet, governor of the European Central Bank, appeared to hint that the ECB was buying up bonds issued by the region’s weaker governments. This week has seen a steady flow of disappointing economic data, with few bright spots . Economists have been speculating that America’s economy could contract again since last Friday’s disappointing GDP data . Many traders now accept that the world economy faces a much tougher time. “It is increasingly becoming apparent that this economic recovery will be slower and more difficult because nations and some consumers are overladen with debt,” said Louise Cooper, markets analyst at BGC Partners. “Repaying the loans will take longer and be more painful than we had previously anticipated. We are in a catch-22 situation. We desperately need growth to pay off the debt, but we cannot grow because of the amount of debt we owe.” European debt crisis Economics Global economy Stock markets Currencies European banks Banking Europe European commission European Union Italy Spain European Central Bank US economy Graeme Wearden guardian.co.uk

Posted by on August 4, 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.