The main indexes in Germany and France shed another 3.9 percent and 3.4 percent early Friday after falling more than 5 percent Thursday. The benchmark index for the British market was 2.8 percent lower.
Asia, which had missed the worst of the selling Thursday, also saw painful losses on Friday.
The Nikkei 225 index in Japan closed down 2.5 percent, the Kospi in South Korea plummeted 6.2 percent, and the Taiex in Taiwan retreated 3.6 percent. The market in Australia closed 3.5 percent lower.
By midafternoon, the key market indexes in Singapore and Hong Kong, were both 3.2 percent lower.
On Wall Street Thursday, feeble data on jobless claims, homes sales and factory activity in the mid-Atlantic region combined to set off fresh jitters about the state of the U.S. economy, while in Europe, investors were spooked by news that one bank, out of nearly 8,000 in the euro zone, took advantage of a European Central Bank program that ensures institutions have ample access to dollars.
The bank, which the E.C.B. declined to identify, borrowed $500 million on Wednesday, a relatively modest sum. But it was the first time any bank had tapped the E.C.B. dollar pipeline since February. A shortage of dollar financing for European banks was one of the more alarming features of the financial crisis in 2008.
Highlighting how skittish investors are in the absence of comprehensive information about the banking system, stocks reacted with a sharp slump. On Wall Street the Dow Jones industrial average fell 3.7 percent, and the Standard Poor’s 500 stock sagged 4.5 percent.
Analysts at Barclays Capital commented in a research note on Friday that, while the U.S. debt ceiling debate and weak global economic data had contributed to the turmoil of the past month, “the single most important contributor has been the intensification of the euro area fiscal crisis, from a peripheral issue to an increasingly core issue.”
Over the next few months, they wrote, global growth prospects and the euro area fiscal crisis are likely to be major drivers of the markets. “Our baseline scenario is that a muddle-through approach on policy eventually stabilizes euro area markets, but the tail risks are large and market volatility is likely to remain high.”
Analysts at HSBC echoed this in a separate note Friday. “While some of the data is clearly worrying, our central scenario is of a slowdown, and not a meltdown,” they wrote, adding that corporate balance sheets – unlike those of governments — remain, on the whole, very healthy.
Still, “the structural debt problems in Europe, weaker U.S. economic data and growing concerns on the impact to growth are all recurring concerns that are likely to keep markets volatile.”
On Friday, futures on the S.P. 500 were down 1.7 percent, and gold continued the sharp ascent it has seen over the past months, demonstrating that nervousness remained intense.
The precious metal, seen as a relative haven at times of market turmoil, soared to more than $1,867 an ounce as trading in Europe got underway — a nominal record high and a rise of about 30 percent since the start of July.
The Japanese yen, which has also been rising amid the turmoil, was hovering near a post-World War II high. By midafternoon, one U.S. dollar bought 76.5 yen.
The currency’s strength is a major concern to Japanese exporters, and has set of a stream of comments from policy makers, aimed at halting the rise.
Kaoru Yosano, the Japanese economics minister, on Friday said the turmoil in global stock and currency markets called for international cooperation, but warned the task would not be easy.
“There will be a role for Japan to play in stabilizing global currency and financial markets. It will be important to actively cooperate when that time comes,” Mr. Yosano told reporters. “This situation will not be easy to untangle,” he added. He did not give specifics of what form that cooperation might take.
Markets were “starting to lose their ability to predict economic realities,” Mr. Yosano said. He cited the flight to safety among global investors to gold and safe haven currencies such as the yen. “The markets move autonomously, and we have no tranquilizer,” he said.
Cameron Umetsu, senior economist for Japan at UBS, said the Japanese government was likely to stage further interventions in currency markets in an attempt to temper the yen’s rise.
Earlier this month, the Japanese government used an estimated 4.5 trillion yen to weaken the yen against the dollar, which fallen by about 6 percent against the Japanese currency in the past 3 months.
“The Ministry of Finance is strongly committed to containing yen strength, to the point where one could expect larger and more frequent forex intervention,” Mr. Umetsu wrote in a note to clients.
Hiroko Tabuchi contributed reporting from Tokyo, and Jack Ewing contributed from Frankfurt.
Article source: http://feeds.nytimes.com/click.phdo?i=eb345903023dd1892e4439a7b79a7fb1
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