Stock markets tumble over health of global economy

3rd August 2011

Shares in London plunged to an eight month low, adds This is Money, as fears over the US and euro-zone economies again saw global investors abandon the stock market for safer bets like gold.

By late afternoon the FTSE 100 was down 138.22 points at 5580.17.

In New York, the Dow Jones is trading nearly 1% down after a hefty 2.2% drop last night, as official figures showed a fall in US consumer spending for the first time in nearly two years, reports This is Money.

After heavy selling in London when trading began, as worries about the European debt crisis continued, the declines accelerated once Wall Street opened in the wake of yet more poor US economic figures.

In addition, Spain and Italy's soaring borrowing costs are of "deep concern", EC president Jose Manuel Barroso said today, fuelling speculation that policy makers may be forced to take drastic action to quell the escalating turmoil, adds the Daily Telegraph.

The report says that emergency talks were held across the Eurozone as the yields on Italian and Spanish bonds eased after teetering dangerously close to 14-year highs.

Commenting on the situation for UK bond yields as the economy continues to suffer, Mindful Money economist blogger Shaun Richards adds on his blog: "…in the UK as our ten-year bond yields have hit 2.75% this morning which is the lowest for over fifty years and is lower than they fell to when we were buying some £200 billion of our own bonds in an attempt to reduce the yield. Since their peak in February our benchmark yield has dropped by just over 1.1%

"…The knee-jerk response is that money is flowing into safe havens at a time of trouble and in my opinion it is better to say perceived safe havens…. However there is a deeper reason that is really driving this in my opinion and it is fear of another recession and if it goes much further maybe fear of a depression." Read more here.

To receive our free email newsletter sign up here.

Leave a Reply

Your email address will not be published. Required fields are marked *