European markets plunge after Asian rout

Aug. 5, 2011 at 3:30 AM
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FRANKFURT, Germany, Aug. 5 (UPI) -- European stocks plunged a second day Friday and Asian shares nosedived as deep economic-growth fears reached fever pitch ahead of a key U.S. jobs report.

British, German and French stock-market indexes fell more than 1 percent in early morning trading after closing down 3.5 percent to 4 percent Thursday in the worst rout in more than two years that also saw the U.S. Dow Jones industrial average plunge 5 percent and nearly 11 percent in two weeks.

In Britain alone Thursday, more than $80 billion was wiped off the value of the country's 100 biggest companies.

The euro fell against other currencies Friday after losing nearly 1.5 cents against the U.S. dollar Thursday.

Asian markets tumbled in late afternoon trading, with Tokyo's Nikkei 225 index down 4 percent, Hong Kong's Hang Seng index and Taiwan's Taiex were both down nearly 5 percent and Australia's Standard & Poor's/ASX 200 index down more than 4 percent.

Oil dropped from below $87 a barrel Friday, which The New York Times pointed out could mean lower U.S. gasoline prices by the Labor Day weekend next month.

Other commodities also fell after being hammered Thursday. Gold, considered the safest of safe havens, regained part of the $7.30 an ounce it lost Thursday in the global tumult.

"It was an absolute bloodbath," John Richards, head of strategy at RBS Global Banking & Markets, told The Wall Street Journal.

In Europe, leaders grappled Friday with an increasingly continent-wide debt crisis that started in Greece, spread through Ireland and Portugal and now was poised to swallow Italy and Spain, the eurozone's third- and fourth-largest economies and the world's seventh- and 10th-largest.

Concerns grew that the crisis was becoming too big for governments and banks to contain.

"Markets remain to be convinced that we are taking the appropriate steps to resolve the crisis," European Commission President Jose Manuel Barroso said in words many investors saw as confirming their fears.

Barroso also called for an emergency strengthening of Europe's bailout mechanism and said he had "deep concerns" about the faltering Spanish and Italian economies.

The European Central Bank sought to shore up confidence Thursday by buying Irish and Portuguese bonds, but it didn't buy bonds from Italy or Spain -- countries seen as most at risk from the spreading crisis.

The crisis is increasingly viewed as a disease spreading to countries whose economies may appear superficially healthy but whose immune systems were weak.

Worries that no longer existed about a U.S. default led to broader fears about the national economy's failing health.

The U.S. Labor Department was to release its July jobs report at 8:30 a.m. EDT Friday.

Many economists forecast the unemployment rate would remain at 9.2 percent, as it was in June, with 75,000 to 120,000 in net new jobs created. The job growth would come from the private sector, with a government job loss of 30,000, the economists forecast.

U.S. unemployment was 7.6 percent in January 2009, when President Barack Obama took office.

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