A roundup of trading on major world markets:
NEW YORK – US stocks fell sharply after the head of the European Central Bank said there was no existing plan for large-scale government bond purchases, as many in the markets had hoped.
ECB President Mario Draghi’s remarks sent borrowing costs soaring for Italy, Spain and other countries with heavy debt burdens.
European stock indexes fell and the euro weakened against the dollar.
Draghi made his comments after the central bank cut its benchmark interest rate to one per cent and took other modest steps to help shore up Europe’s financial system.
Bank stocks led the way lower. Citigroup Inc. plunged 7.1 per cent, Morgan Stanley lost 6.9 per cent and JPMorgan Chase & Co slid four per cent, the most of the 30 large companies in the Dow average.
The Dow Jones industrial average was down 165.52 points, or 1.36 per cent, to 12,030.85 in afternoon trading.
The S&P 500 fell 22.61 points, or 1.79 per cent, to 1,238.4, and the Nasdaq lost 41.41 points, or 1.56 per cent, to 2,607.8.
The US dollar and US Treasury prices rose as investors shifted money into investments seen as relatively safe.
LONDON – European stocks and the euro fell in volatile trading, tracking moves by the ECB and comments by politicians ahead of a crucial EU summit called to prevent a collapse of the eurozone.
Also weighing on markets was an announcement due after the close of trading on how much capital European banks need to meet new requirements aimed at making sure they can withstand future financial shocks.
The European Central Bank cut its key interest rates for the second time in two months, cutting the rate for its main refinancing operations by a quarter of a percentage point to 1.00 per cent, briefly sending stocks and the euro higher.
The ECB later said it would extend its liquidity-providing operations and accept a wider range of collateral for loans in a bid to support eurozone banks.
But ECB chief Mario Draghi poured cold water on traders’ hopes that it would announce plans to step up a program of major bond purchases to help ailing eurozone countries, sending markets falling.
The euro dipped to $US1.3308 from $US1.3413 late in New York on Wednesday, having fallen as low as $US1.3289 – its lowest level since central banks intervened on markets last week to support banks.
London’s FTSE-100 index of top companies slid 1.14 per cent to close at 5,483.77 points, while in Frankfurt the DAX 30 dropped two per cent to 5,874.44 points and Paris’s CAC-40 tumbled 2.53 per cent to finish the day at 3,095.49 points.
Milan plunged 4.29 per cent and Madrid 2.12 per cent.
Markets were also spooked by apocalyptic comments from French President Nicolas Sarkozy, who warned a deal was needed at the two-day EU summit beginning later in Thursday in Brussels.
“Never has Europe been so necessary and never has it been in so much danger … Never has the risk of Europe’s explosion been so great,” Sarkozy said in a speech in Marseille ahead of the summit.
HONG KONG – Asian markets slipped on fears that a summit to save the eurozone might fail to deliver a knockout blow to the region’s two-year sovereign debt crisis.
Tokyo shed 0.66 per cent, or 57.59 points, to end at 8,664.58 and Seoul was 0.37 per cent lower, dipping 7.03 points to 1,912.39.
Hong Kong fell 0.69 per cent, or 132.77 points, to 19,107.81 while Shanghai gave up 0.12 per cent, or 2.91 points, to close at 2,329.82.
The losses come after most markets rose over the past week on hopes that after several failed attempts, Europe’s leaders would finally resolve a crisis that threatens to tear the currency union apart and lead to another global downturn.
WELLINGTON – New Zealand shares fell in a generally weaker day across Asia ahead of Friday’s EU summit to save the embattled euro.
Sanford, which has been indicted on pollution charges in the US, led the decline, chased by Rakon at a record low and Fletcher Building.
The NZX 50 Index fell 13.097 points, or 0.4 per cent, to 3,269.946.
