European stock markets tumble on debt concerns
European shares have fallen sharply for the second straight day as concerns about government debt levels continue to weigh on investors.
In Paris, the Cac 40 index fell 2.5% in morning trading, while in London the FTSE 100 dropped 1.9% and in Frankfurt the Dax lost 1.6%.
Earlier, Japan's Nikkei index slumped almost 3%, while stock markets in Hong Kong, Korea and China all fell sharply.
Debt concerns were sparked by a lack of demand for Portuguese government bonds.
This reignited fears that countries such as Portugal and Greece would struggle to fund their burgeoning national deficits.
'Euro sell-off'
Greece has outlined ambitions plans to reduce its deficit dramatically over the next two years, but doubts remain about whether its government will be able to deliver such swingeing cuts.
But it is not just stock markets that have been hit.
"It's been a dismal 24 hours as stock markets, commodities and currencies have fallen around the world, while bond default risk has soared [and] investors have fled risky assets into the relative safety of the dollar," said Michael Hewson at CMC Markets.
As a direct result of the debt concerns, the euro slid a further 5 cents, or 0.3%, against the dollar to $1.3713, after falling more than 1.5 cents on Thursday.
"It's very bad sentiment for the euro, it's a sell-off for the euro definitely," said Lee Sue Ann at United Overseas Bank at Singapore.
Asset bubbles
Concerns over debt levels are also tapping into wider fears about the strength of the global economy, analysts said.
Some investors believe the recovery is the direct result of governments pumping billions of dollars into their economies to stimulate demand.
When they stop pumping money in, they fear, economies will begin to shrink again.
Growing budget deficits mean that governments cannot afford to spend much more on boosting their economies.
"The real concern is that the whole recovery is nothing more than poorly-directed government stimulus which has simply had the effect of boosting asset prices," said David Morrison at GFT.
Investors are now eagerly awaiting US jobless data out later. Written by Arkline, Process Servers and Tracing Agents to the Legal & Debt Profession.
News article posted on 05 February 2010