Global shares plunge on unremitting economic gloom
Thursday, 22 September 2011 03:24
Global stock markets have fallen sharply in trading today following a raft of gloomy economic announcements over the past two days.
Yesterday, the International Monetary Fund (IMF) published its bi-annual Global Financial Stability Report, warning that banks are vulnerable and need to bolster their levels of capital. This followed Tuesday’s IMF action of cutting of growth forecasts for all developed countries except for Germany and Canada in 2012.
Yesterday, the US Federal Reserve issued a downcast report on the US economy, saying, “there are significant downside risks to the economic outlook, including strains in global financial markets." The launch of Operation Twist failed to calm the markets.
Today saw the latest leading economic organisation, The World Bank, issue its own summary of events. Robert Zoellick, President of the World Bank commenting on the global economy, said: “It is in a danger zone,” though he also said that a double-dip recession was unlikely.
However, he added: "My confidence in that belief is being eroded daily by the steady drip of poor economic news. Delays will narrow choice and make them more costly - we all have a stake in this succeeding."
The combined rhetoric sent global shares spiralling downwards. By 3pm UK time, the FTSE 100 was down by 4.95 per cent or 262 points, hovering at 5,026.81. The French Cac-40 fell by 5.05 per cent to sit at 2787.45. Meanwhile, the German Dax was down by 4.58 per cent at 5,187.22.
In early trading in the US markets, the Dow Jones immediately fell and had dropped by 363 points to stand at 10761.34.
Many analysts believe that the market reaction to various policy initiatives by policymakers across the globe are a sign that, whether it be the Federal Reserve’s action of buying up longer term debt, or the eurozone’s bond-buying programme, traders believe political leaders have run out of ammunition and whatever they do is to little effect.
Today, the UK and six other G20 countries have written to the G20’s current President, France, calling for concerted, authoritative and immediate action to curtail the threat to the global economy from the economic debt crisis in the US and the eurozone.
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