The markets in Europe and North America took a dive on Thursday as news of credit crisis in Euro Zone. Massive budget deficits has hurt Portugal, Spain and Greece. If that’s not enough to worry there are fears the US unemployment will go up sent the Dow Jones Industrial Average down 261 points to 10002.
The news sent the US dollar soaring against the euro as investors seeking a hedge against the euro. The news also affect the prices of gold, oil and other commodities .
“The risk aversion trade is back on as the debt problems of the Europe are for the first time bringing down global markets,” said Gary Jenkins, head of fixed income research at Evolution Securities in London.
The European Bourses all close down on the news: Portugal’s stock markets fell 4.98 per cent, the biggest single day fall since November 2008. Spanish shares dropped 5.94 per cent to the lowest level since July, while Greek equities fell 3.89 per cent.
Here in the US the market fell on the word that weekly unemployment filings climbed by 8000 to 480,000.
The S&P 500 fell 3.11 per cent to 1,063.11 – its worst day since April 2009 – to its lowest level in three months. The FTSE 100 dropped 2.2 per cent and the FTSE Eurofirst 300 fell 2.8 per cent. The price of a barrel of oil fell more than 5 per cent, the biggest daily drop in six months. In late New York trading, the benchmark crude oil contract was at $72.98. Gold was also hit, with a fall of 4.3 per cent to $1,062
European Central Bank president Jean-Claude Trichet attempted to reassure the markets;by stressing that they compared “flatteringly” with those of other countries, failed to reassure investors.
Trichet says that Euro zone debt is 6 percent of GDP because the US debt is over 10% of GDP. He has demand Greece, Spain and Portugal to cut their debt.