French stocks and banks rock amid more volatility in global markets.
Wednesday, 10 August 2011 06:16
Another volatile day for the UK stock market saw early gains in the FTSE 100 reversed after concerns that France could follow the US in losing its triple-A credit rating.
Initially the FTSE rose by around four per cent buoyed by the announcement from the US Federal Reserve to keep interest rates close to zero until mid-2013.
However, the increases fell back by around half after the Governor of the Bank of England, Mervyn King cut the growth forecast for the UK from 1.8 per cent to 1.4 per cent.
Amid rumours that France could lose its coveted credit rating both the DAX in Germany and the Cac in France fell by more than three per cent.
All three of the main ratings agencies, Standard & Poor’s, Moody’s and Fitch denied that France will lose its triple-A rating but this had little effect on the markets.
The rumours had a particularly big impact on the French bank Societe Generale, whose shares fell by 21 per cent at one point before recovering to a loss of around 13 per cent by 5pm tonight.
Meanwhile, at the end of the day’s trading the FTSE 100 had fallen by three per cent to 5007, whilst the Cac ended down by 5.4 per cent and the Dax closed at 5.1 per cent lower than it started when the bell rang this morning.
The Dow Jones opened immediately down by 2.5 per cent and this extended to 3.5 per cent before falling again to three per cent, 300 points, by lunchtime in the US. The Nasdaq was down by 2.5 per cent. Gold rose by about two per cent to reach $1,782 per dollar.
Other French banks suffered, although not as dramatically as Societe Generale. Credit Agricole fell by 12 per cent and BNP Paribas registered a 9.5 per cent slide.
The French Prime Minister, Nicolas Sarkozy returned early from his holiday to hold an emergency meeting with Finance Ministers and the leader of the French central bank to discuss the economic situation.
Some analysts said that today’s action by French investors was simply a method of making money by causing a panic and buying the shares at a low price before they bounce back.
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