Shares of the largest European companies have registered the largest decline Thursday in the last two and a half years, following a series of negative data that have questioned the U.S. economic recovery, the largest in the world, reports Reuters.
In New York, halfway into the daily session, the Dow Jones was down 3.63% and Nasdaq was down 4.29%.
The American Stock Exchange received an unexpected blow from Wall Street Journal which announced that the Federal Reserve had extended discussions with the heads of the main branches of European banks, fearing the effects the debt crisis in Europe may have over the U.S. banking sector.
New record for gold price
Gold price rose 2% to over $1,820 an ounce and oil quotation for the U.S. market dropped more than four dollars, after several negative data on the U.S. economy.
Another factor that influenced the market is Federal Reserve announcement on analyzing the vulnerability of U.S. subsidiaries of European banks on a possible escalation of financial pressures.
At 3:23 p.m. GMT, spot gold was up 1.9% to $1,822.29 an ounce, after a maximum of $1,825.99 an ounce reached during the day. The precious metal is about to record an advance of 9% within two weeks, the best performance in such a period from mid February 2009.
German titles, hit hard
The worst affected were German titles, evolution attributed by the traders on impact of banning short-selling transactions of the financial shares of other European countries, and intensifying fears about the inability of politicians to come up with a plan for solving the crisis of sovereign debt euro area.
Banking sector, exposed to the debt crisis in the euro area declined by 6.6% with an overall decline of 29.7% from the beginning of the year.
Among the banks whose shares have plummeted, Barclays and Societe Generale are both down 11.6%.
In Germany, Commerzbank securities fell by 10.5%. FTSEurofirst 300 pan-European index closed down 4.9% and recorded the worst drop after March 2009. “The market begins to consider a recession. Data published by the Philadelphia Federal Reserve are absolutely abominable”, said Michael Hewson, an analyst at CMC Markets.
The index calculated on the business activities of the Federal Reserve of Philadelphia fell to -30.7 points, from 3.2 points in July. Analysts anticipated that the index will climb to 3.7 points.
Housing sales fall, increased unemployment in U.S.
Separate data showed U.S. home sales fell unexpectedly in July. Other factors that negatively influenced the international stock exchanges are the announcement of the Federal Reserve (Fed) of the state of New York on analyzing the vulnerability of U.S. subsidiaries of European banks on a possible escalation of financial pressures, a downward revision of Morgan Stanley estimates on the global economic outlook and higher than expected number of claims for unemployment benefits in the U.S.
London’s FTSE100 index lost 4.49%. Frankfurt Stock Exchange closed down 5.82%, Paris was down by 5.48%, Milan by 6.15% and Madrid 4.7%. Athens Stock Exchange fell by 3.38% and Switzerland by 4.15%.