Just when you thought the world of finance might finally be recovering from the recession of the past few years, all signs are pointing to more severe market hardship to come. Indications of the Spanish and Italian economies failing as well as fears of another American recession are fuelling one of most serious drops the world market has seen yet.
Last night, the FTSE 100 fell to its lowest levels since September last year, with £50bn worth of losses at the close of last night. America saw one of its worst falls in history, with the Dow Jones falling 4.3%. Asia also saw the Nikkei 225 sliding 3.7% while the Hong Kong Hang Seng fell 5%.
“Losses today have been indiscriminate,” said IG Markets strategist Ben Potter. “The big question on everyone’s mind is what will happen across European and US markets tonight and will there be any form of emergency policy response?”
The fall is being blamed on the Greek debt crisis as well as fears that Italy and Spain might also default on their own debt and require EU bailouts. This could be especially catastrophic for Germany and the UK, being two of the biggest investors in the region. Greek’s failure in particular has left British banks in jeopardy.
However, that’s not to discount the part the US economy is playing in this entire mess. As Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets says, “The US economy is close to stall speed and showing signs of weakening further.” The recent issues with the debt ceiling haven’t exactly helped investor confidence either.
Commenters are saying the markets are in even worse shape than after the Lehman Brothers bankruptcy. Could this be a sign of another year of economic hurt for economies around the world? For that matter, will the Eurozone be able to weather the problems of union? Share your thoughts here.