Recession fears cause havoc on world markets - Business News - Business - The Independent

Recession fears cause havoc on world markets

Jitters began when Morgan Stanley warned the US and eurozone were 'hovering dangerously close to recession' and it wouldn't take much to tip the balance

World markets collapsed last night, with investors bolting for cover on fears that the US and the eurozone were "dangerously close to recession".

More than £62bn was wiped off the blue chip FTSE 100 index, which slumped by 239.37 to 5092.23 – its worst one-day fall in points terms since November 2008. In percentage terms, the index endured its darkest session since March 2009. European shares fared no better, putting in their worst daily performance since the credit crunch as growth concerns supplemented existing worries about the eurozone's sovereign debt crisis.

The Spanish stock market was down nearly 5 per cent, France by 5.5 per cent, Germany by 6 per cent and Italy by more than 6 per cent. On Wall Street, the Dow Jones average closed 419.63 points, or 3.68 per cent, lower at 10,990.58, while the Standard & Poor's 500 Index fell 4.46 per cent to 1,140.65. The Nasdaq Composite Index dropped 5.22 per cent to 2,380.43.

The jitters began as traders learned that Morgan Stanley had cut its global growth forecast for this year to 3.9 per cent from 4.2 per cent. Striking fear into the heart of investors was the bank's view that, as the world slowed, the US and the eurozone were "hovering dangerously close to recession".

Although their predictions still anticipate growth, with the US expected to expand by 1.8 per cent this year and the eurozone expected to grow by 1.7 per cent, they warned that "it won't take much in the form of additional shocks to tip the balance".

"The main reasons for our growth downgrade, apart from disappointing incoming data, are recent policy errors in the US and Europe, plus the prospect of further fiscal tightening there in 2012," they said, singling out "Europe's slow and insufficient response to the sovereign crisis and the drama around the lifting of the US debt ceiling" for special mention.

The bears did not have to look far for evidence to back up the fears of a dreaded double dip in the world's largest economy. Although the weakness in New York may have been exacerbated by technical factors, sellers found enough fodder in some disappointing economic data out of the US.

First, the US Labor Department said new claims for unemployment benefits had climbed by a higher than expected 9,000 to 408,000 last week.

That was followed up by the news that the Federal Reserve Bank of Philadelphia's index of business conditions in the mid-Atlantic region had plummeted to minus 30.7 in August, down from a positive reading of 3.2 in July, and well below expectations of 3.7. The headline reading takes the index back to levels last seen before the post-financial crisis recession in the US ended in 2009. The flipside of the equity market rout was the scramble into safe havens, chiefly US government debt. The 10-year Treasury note, the most liquid bond in the world, soared in value, pushing the interest rate on that note to below 2 per cent for the first time in history.

Treasuries are even more popular than at the peak of the credit crisis in 2008 – an irony that will not be lost on Standard & Poor's, the agency whose downgrade of the US Government's credit rating earlier this month appears to have been largely ignored.

Similarly, the interest rate on 10-year UK debt, or gilts, fell to an all time low of 2.238 per cent. German debt also saw influx of investors, while gold, the another sought-after haven in times of economic stress, spiked to as much as $1,825.99, the latest in a series of record highs.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skies as 007 for first time
Sport
footballThe latest scores and news from Dortmund vs Arsenal and Liverpool vs Ludogorets
PROMOTED VIDEO
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
Life and Style
techCriminals now targeting e-readers
Life and Style
tech
Life and Style
tech... and together they're worth at least £100 million
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
fashion
Travel
news This video may make you think twice about ever taking the Tube again
Life and Style
A spider is seen in its web on September 16, 2014 in Hohen Meissner, Germany.
tech The 'Spider in Da House' app has been developed by scientists to tackle arachnophobia
Life and Style
fashionIncredibly, it hasn't been branded 'Will.eye.am'
News
A plane flies close to the eruption of the Icelandic volcano
newsAnd yes, it's quite something
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week