5 May 2010

Markets slide amid Europe debt concerns

10:36 pm on 5 May 2010

World markets have fallen sharply as concerns about high levels of European government debt continue to shake investor confidence.

Stocks have tumbled to eight-week lows and the euro hit a one-year trough as investors worried a debt crisis would spread to other euro zone countries following a massive bailout for Greece.

Asian markets weakened on Wednesday, following a slide in US and European markets.

Shanghai's key index fell as much as 2% to its lowest level in seven months, before ending the day up 0.8%. Hong Kong shares slid to a 10-week closing low, down 2.1%, while the Australian bourse ended the day 1.3% lower.

The New Zealand benchmark index was down 49 points, or 1.5%, at the close of trade. The dollar also weakened, except against the euro. On Wednesday it reached a two-and-a-half year high of over 55 cents.

On Tuesday, the euro fell to a 13-month-low against the US dollar, dropping to $1.3004, after earlier slipping below the $1.30 mark.

The markets' slide came despite an agreement reached at the weekend to provide Greece with a 110 billion euro, three-year bailout package, the BBC reports.

US stock markets had their worst session in three months, with the Dow Jones falling by 2%, the tech-based Nasdaq by 2.98% and the S&P 500 by 2.38%.

In London and Frankfurt, the leading share indexes closed down 2.6%, while in Paris the main index lost 3.6%. Shares in Athens closed down 6.7%.

European Union leaders had hoped the rescue package would restore investor confidence.

There have also been worries that other European countries, such as Portugal and Spain, may also find it difficult to raise enough money to service their high budget deficits. The cost of government borrowing rose in both countries on Tuesday as a result.

Despite the massive loan package agreed by the eurozone and the International Monetary Fund, doubts still remain about whether Greece will be able to raise taxes and cut spending enough to address its longer-term debt problems.

On Wednesday a general strike has been called across Greece as protests against planned spending cuts and tax rises continue.