- Join the France 24 community here
- Log in
Latest update: 23/09/2011
- financial crisis - G20
G20 stabilisation pledge fails to reassure investors
A pledge from the world’s major economies to preserve financial stability and keep banks stocked with the cash they need for day-to-day operations failed to reassure global investors Friday.
AP – A pledge to stabilize markets from the world’s leading economies has done little to reassure investors Friday, a day after fears over the global economy had sent stocks skidding.
Finance ministers from the G20 countries meeting in the U.S. capital pledged Thursday to “take all necessary actions to preserve the stability of the banking systems and financial markets” and to make sure banks have the cash they need to pay their day-to-day expenses.
The G20 statement wasn’t much – it mostly reiterated pledges made earlier – but the show of solidarity was enough to stem the losses in Europe ahead of an expected modest advance in the U.S. Asian shares, however, continued to fall sharply, with South Korea’s Kospi index posting a whopping 5.7 percent decline.
“The statement from the G20 last night may have taken the edge off the current bitter market sentiment but the reassurances from the finance ministers lack substance,” said Jane Foley of Rabobank. “Until politicians back their actions with words in respect to moving closer to a solution to the eurozone debt crisis, markets will continue to worry about a messy and painful outcome from the eurozone debt crisis.”
In Europe, France’s CAC-40 was down 0.9 percent at 2,755 while the DAX in Germany was also 0.9 percent lower at 5,118. The FTSE index of leading British shares was 0.4 percent lower at 5,023.
Wall Street was set to open slightly higher. Dow futures were up 0.2 percent at 10,667 while the broader Standard & Poor’s 500 futures were up the same rate to 1,125.
While worrying about the global economy following the U.S. Federal Reserve’s warning earlier this week that the U.S. economy faced sizable downside risks and a raft of downbeat European and Asian economic indicators, investors continue to keep a close watch on developments in Greece.
“The markets are eagerly awaiting a resolution or at the minimum, a more rigid strategy to reduce Greeces debt liabilities,” said Giles Watts, head of equities at City Index.
Bank stocks have led the way down in recent days as investors fret over their potential exposure to the debts of Greece. Those fears have become more acute as the markets increasingly price in the likelihood of a Greek default.
Athens has had a series of meetings with its creditors this week to try to avoid that, but it’s unclear whether it will be able to dig itself out of its debt hole, even with the help of billions from the European Union and the International Monetary Fund.
Those concerns have knocked confidence in the euro over the past week or two. After Thursday’s plunge it was trading a little bit steadier, up 0.1 percent at $1.34991.
Several analysts think the current respite in the markets was unlikely to last since recent economic data from Europe – and even powerhouse China – has been weak and could indicate that some major economies are headed back into recession.
Jean-Pierre Jouyet, the head of the French market authority, the AMF, told France Inter radio that “the situation is very, very worrying. We are in a worldwide situation of crisis,” pointing to debt in Japan, “imbalances” in the United States, and Europe’s sovereign debt troubles.
“We must take urgent measures on the international level,” he said.
Joaquin Almunia, who runs the department in the EU’s executive Commission that has to clear bank bailouts, suggested earlier this week that one of those measures may be to extend crisis rules that make it easier for governments to rescue failing lenders. He also said that even banks that passed stress tests this summer may need to raise more money.
Despite these ongoing concerns, benchmark oil rose 35 cents to $80.86 – though that nowhere near makes up for its plunge in recent weeks.
Earlier in Asia, Hong Kong’s Hang Seng fell 1.4 percent to 17,668.83 after losing nearly 5 percent the day before. Australia’s S&P/ASX 200 index fell 1.6 percent to 3,903.20.
South Korean shares took a large hit, with the Kospi tumbling 5.7 percent to 1,697.44. Mainland China’s Shanghai Composite Index lost 0.4 percent to 2,433.16. Japan’s market was closed for a holiday.
Read more
Business news, technology, media and finance reports
‘Darth Vader’ demands free land from Ukrainian government
Browse all editions
React to the article
(3) Reactions
dear tansah thomas, You are
dear tansah thomas,
You are receiving this message because you joined FreeLotto on Saturday June 27th, 2009
on ne sait pas ce qui se
on ne sait pas ce qui se cuisine la bas.
tout ce que je sais c’est que je connais beaucoup de petit porteurs déçus qui ne vont meme pas chercher leur dividendes …or la somme total reste dans les comptes de la banque
Solutioning the Bank problem
In term of Budget Revenue the Sovereign debt in most of the EU nations is much much smaller than a standard home mortgage.
The problemes is the Banking system, it is easy for the ECB to help refinancing the Banks reserves with a formula that would satisfy all Euro zone members as long as they can prevent Credit Swaps Derivatives ETF and other convoluted products looking more like puntimg to compromise the reserves as fast as they get filled up by punters cashing in the bonus immediately on each transaction or Banks swapping/ cahing in immediately on the security advantage for less secure finance.
Typical more simple example, A Bank has been given State Garantee for Homebuyers on its loans, its loans are now triple A rated. However there was no condition to the garantee so the bank immediately cash in on the new rating by packaging all the AAA loans into a loan portfolio for sale to any third party to cash in immediately on the gained security at the expense of the tax payers garantee.
One would like to be more precise, but then it get lost between Cyberspace and crime or simply punting and takes too long to develop.
Unless Banks can be trusted to lend to each other we are heading straight for GFC 2.0, as usual Politicians will only take action after we get there.