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European markets tumble over debt concerns

Text by News Wires

Latest update : 2011-09-09

World stock markets tumbled Friday on fears over debt problems in the euro zone, and nervousness over the outcome of a Greek debt swap. The euro also suffered, hitting a six-and-a-half month low against the dollar.

REUTERS -World stocks and the euro tumbled on Friday on worries over Europe's festering debt problems as the stakes intensified for the world's top finance officials to find ways to prevent the crisis from worsening.

The euro hit 6-1/2 month lows against the dollar and the yen, with more declines likely after the European Central Bank shifted away from further rises in interest rates, a key driver in the single currency's rally this year.

Nervousness over the outcome of a Greek debt swap deal fuelled safe-haven buying of German and U.S. government debt. The 10-year Bund yield hit another record low, while yields on benchmark U.S. Treasuries were close to a 60-year trough.

The swap deal is critical for Athens to secure a second bailout and avert a near-term default that could ripple across the region and the global banking system.

"Europe is the No. 1 thing causing pressure on the market as the realization grows that what we've done so far hasn't worked," said Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp, which has $1.65 trillion in client assets.

Divisions within the ECB on the handling of Europe's debt woes boiled over on Friday. Reuters reported board member Juergen Stark will resign because of a conflict over its controversial bond-buying programme. The ECB later confirmed Stark will step down at the end of the year.

With that as a backdrop, finance ministers and central bankers from the Group of Seven industrialized nations were to meet in Marseille later on Friday.

Meeting host France has called for a coordinated response from G7 members to deal with Europe's debt crisis and the region's shaky banks.

In the United States, President Barack Obama on Thursday night unveiled his $447 billion plan to revive economic growth. But investors worried Congress would hold it up and the Federal Reserve may not follow quickly enough with its own action.

"The speech was positive, but there are questions about whether it can get through Congress and how it will all be paid for," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Fed Chairman Ben Bernanke, in a speech on Thursday, left the door open for more monetary stimulus but withheld details on the timing and what type of measures the Fed would enact.

At 11:30 a.m. EDT (3:50 p.m. British time), the Dow Jones industrial average .DJI was down 239.31 points, or 2.12 percent, at 11,056.50. The Standard & Poor's 500 Index .SPX was down 23.91 points, or 2.02 percent, at 1,161.99. The Nasdaq Composite Index .IXIC was down 38.91 points, or 1.54 percent, at 2,490.23.

Top European shares were off 1.7 percent, and the MSCI world equity index was off 1.8 percent. The FTSEurofirst 300 index and the MSCI world gauge were down 2.7 percent on the week.

Another retreat in equities boosted safe-haven German and U.S. government bond prices. The 10-year Bund yield touched an all-time low of 1.782 percent, while the benchmark 10-year U.S. yield was last 1.95 percent, not far from a 60-year low of 1.9080 percent set on Tuesday.

The euro was last down 1.2 percent against the dollar at $1.3699, its lowest in 6-1/2 months. The single currency has fallen 4.7 percent in September.

Gold slipped after soaring to a record high above $1,900 an ounce earlier this week due to its appeal as both a safe haven and a hedge against inflation.

It was last down 0.7 percent at $1,856 an ounce as nervous investors sold the metal on growing concerns its run-up had been overdone.

Date created : 2011-09-09


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