Stocks on Wall street tumbled again Tuesday morning, following drops in Asia and Europe, as fears over a major banking crisis in Europe mounted along with expectations that Greece could soon default, accelerating a global economic slowdown.
In early trading, the Standard Poor’s 500-stock index was down 1.24 percent to 1,085.63, dipping officially into bear market territory, defined as a 20 percent drop from the previous peak. The SP 500, considered a broad measure of stock performance, last peaked in April.
The Dow Jones industrial average lost 1.37 percent, and the Nasdaq fell 0.75 percent. The Dow was down 18.6 percent from its May peak, and the Nasdaq was off 19.8 percent from its April peak.
The Wall Street decline mimicked the one in Europe. In London, the FTSE 100 index was down 2.8 percent in afternoon trading, the DAX in Frankfurt was 3.5 percent lower, and the CAC 40 in Paris was down 2.9 percent.
Early Tuesday, finance ministers from the 17-nation euro zone postponed moves to release the next installment of aid to Greece, which means that Greece is now unlikely to receive 8 billion euros ($10.6 billion) before November.
European banking shares fell sharply, led by Dexia, whose value has plunged this week because of its exposure to Greek debt.
France and Belgium moved to shore up Dexia after it lost over 10 percent of its share price on Monday. The bank, one of the first European banks to be bailed out three years ago, held 3.8 billion euros of Greek sovereign bonds at the end of June, according to Reuters. The two countries issued a statement saying they would “take all necessary measures to ensure the safety of depositors and creditors.”
French and Belgian news reports suggested that the bank was considering selling some of its profitable assets and creating a bad bank to house its more troubled assets.
Dexia’s share prices were down 14.6 percent Tuesday.
“What you’re now beginning to see is they are now picking out the banks. Dexia is the weakest,” Justin Urquhart Stewart, director at Seven Investment Management, told Reuters.
“Politicians have to stand behind these banks — whether you call it state support, nationalization, you have to keep the financial system working otherwise we will end up with another credit crisis.”
The price that European governments pay to ensure their sovereign debt rose sharply across Europe, with the largest increases coming in France and Germany, who may be called to bail out weaker nations in the case of a financial crisis.
The MSCI World Index of equities fell 2.7 percent. The index has fallen more than 16 percent this year. The Nikkei 225 in Japan fell 1.05 percent, while the Hang Seng index in Hong Kong lost 3.4 percent to close at its lowest level since 2009.
American crude oil fell 2.65 percent to $75.50 a barrel.
The dollar rose to a fresh nine-month high against the euro, which fell as low as $1.3144, a nine-month trough, before recovering slightly to $1.3181.
Article source: http://feeds.nytimes.com/click.phdo?i=9a0c376d61b5cc5a7279393676ac1c72
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