US and euro slump sends markets into global spin

 

World markets were badly hit yesterday as the fallout from poor US economic data, warnings over the future of the Euro and fears of a global recession spooked investors.

Stock markets across Asia were battered as they responded to news that US unemployment was up to 8.2 per cent, the first rise in nearly a year, and that growth in China's services sector was slowing down.

Japan's Nikkei index closed 1.7 per cent down to 8295.63, its lowest level since November. Shares in one of the Nikkei's best known companies, Sony, dropped below 1,000 yen for the first time since 1980 – the year after the launch of the Walkman.

Tokyo's other benchmark index, Topix, slumped to a 28-year low, while European equities and some commodities, such as Brent crude oil, came under pressure. The German blue-chip Dax index traded at under 6,000 points – an important psychological barrier – for the first time since January, though London was immune to the woes as the stock exchange has ceased trading for the Jubilee Bank Holiday.

European markets had braced themselves for a turbulent day of trading following yet another dreadful weekend of news for the single currency.

George Soros, who made $1bn from the collapse of the pound 20 years ago, warned that Germany had three months to save the euro or risk the continent suffering "a lost decade" on a par with Latin America in the 1980s.

Cyprus central governor Panicos Demetriades warned on Saturday the country's €23bn exposure to Greece meant its banking system might require a European Union bailout.

There are also serious worries that Spain might require a bailout from the International Monetary Fund, after Bankia asked Madrid for €19bn – which would be the biggest banking rescue in the nation's history. On Thursday, the Spanish government could see its cost of borrowing rise to the type of levels that saw Ireland, Portugal and Greece require bailouts when it auctions €2bn of bonds.

In the US, there was no immediate recovery from the sharp losses in the equity markets last Friday. The Dow Jones Industrial Average of 30 leading stocks was slightly down in the first few hours of trading, having dipped more than 30 points shortly after the opening bell, on top of its 275-point decline before the weekend. There were signs from the bond market, though, that traders had become modestly less pessimistic. The benchmark 10-year US Treasury, issued by the US government and used as a safe-haven asset by fund managers around the globe, saw less demand, pushing the interest yield back above 1.5 per cent.

The yield had fallen below 1.5 per cent for the first time in history last week, reflecting investors' desperation to find safe places for their money. However, Ward McCarthy, managing director and chief financial economist at Jefferies in New York, warned the rebound in yields was technical, rather than a response to any improvement in the economy or the financial markets.

"The bond market had a great run last week and is technically overbought," he said. "The wobbly wheels of Europe have never been wobblier, disinflation trends have intensified with the collapse of the commodity complex, and US economic activity is on a decelerating trend."

Another piece of gloomy US economic data emerged yesterday, with order for new factory goods down for the third time in four months in April.

Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
art
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features staging of a playground gun massacre
Travel
travel
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
PROMOTED VIDEO
News
i100This Instagram photo does not prove Russian army is in Ukraine
News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
Morrissey pictured in 2013
people
Sport
sportVan Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
Life and Style
Martha Stewart wrote an opinion column for Time magazine this week titled “Why I Love My Drone”
lifeLifestyle guru Martha Stewart reveals she has flying robot... to take photos of her farm
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Environment
Tyred out: should fair weather cyclists have a separate slow lane?
environmentFormer Labour minister demands 'pootling lanes' for women cyclists
News
people
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

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices