US stocks follow Europe's lead and fall sharply
The US stock market opened this morning with analysts and commentators waiting anxiously to see what would happen in the first session since ratings agency Standard & Poor cuts the US’s credit rating. And the results have not been good.
Individual stocks, individual markets and individual companies were all hit to a lesser or greater extent as investors fled stocks and tried to cut their losses.
Today’s events come after the worst week on Wall Street since the financial crisis of 2008, coupled with continuing fears over the escalation of the eurozone’s own debt crisis.
The Dow Jones industrial average dropped by 2.37 per cent, Standard & Poor’s 500 index was down by just over three per cent and the Nasdaq composite index fell by 3.14 per cent in early trading.
Individual banks were hit too. The Bank of America saw its value fall by 15 per cent.
Some analysts see the current economic turmoil as an opportunity but it is unclear just how much further markets will fall and many experts are at a loss to understand what else central governments can throw at the problem.
Meanwhile, in the UK, the FTSE 100 fell by around 3.4 per cent with investors continuing to flee stocks for safer assets. Despite the European Central Bank buying up Italian and Spanish bonds, which initially seemed to appease the markets and resulted in bond yields for these countries falling from above six per cent to around 5.25 per cent, investors remain unconvinced that the action taken will be enough.
The FTSE volatility index, which tracks investor fears, increased by 28 per cent on Monday after rising all last week. The amount of value wiped off world stocks since the second Greek bail-out on July 29th has reached $3.4 trillion.
US markets were further hampered by concerns over the US job market which fell in August. Gold reached new record heights as investors sold commodities and switched to safe havens.
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