Stock markets fall again as bank shares tumble

[Guest guest]

http://www.bbc.co.uk/news/business-14472079

10 August 2011 Last updated at 16:05 ET

Stock markets fall again as bank shares tumble

European and US stock markets have suffered more large falls, led by steep

declines in banking shares.

In nervous trading, the focus turned to France, where the French government

denied it would follow the US and lose its top-grade AAA credit rating.

Societe Generale bank, whose shares fell up to 20%, was also forced to deny it

was under financial pressure.

France's Cac share index ended down 5.5%. The UK's FTSE lost 3%, and Wall

Street's Dow lost 4.6%.

The FTSE fell by 158 points to 5,007, taking £41bn off the value of the index.

It has now lost almost 15% in the last nine trading sessions.

Italy's FTSE MIB ended down 6.7%.

Shares in Societe Generale ended 14.7% lower.

UK banking shares were also hit, with Barclays down 8.7%, Royal Bank of Scotland

7.3%, and HSBC 5.3%.

" The banks have all got exposure of some degree or another to sovereign debts, "

said Buik, of BGC Partners.

" And none of the banks are going to get away scot-free. There are going to be

writedowns. "

Downgrade for France?

The French government's insistence that it will not lose its AAA credit rating

was confirmed by the three main ratings agencies, Moody's, Standard & Poor's and

Fitch.

But Lyn Graham-, fixed income strategist at Rabobank, said the markets

were right to be concerned that France could lose its AAA credit rating: " We

think from a fundamental perspective that France is due a downgrade, " he told

BBC News.

" In essence, France is the country with a AAA credit rating that can least

afford to pay into any future eurozone-wide bail-out scheme. "

Earlier, President Sarkozy followed an emergency government meeting by promising

France would meet its deficit-cutting target " whatever the developments in its

economic situation " .

The government will meet again on 24 August to discuss measures to cut its

deficit.

The concern regarding Societe Generale and other French banks is about their

large exposure to government debt issued by some of the eurozone's weakest

states, such as Greece.

A spokewoman for Societe Generale said: " SocGen categorically denies all the

market rumours [about its financial stability]. "

Shares in fellow French bank Credit Agricole lost 11.8%, while BNP Paribas

dropped 9.5%.

Calmer morning market conditions had earlier helped the Italian government,

whose indebtedness has worried the markets recently, to borrow 6.5bn euros from

the market in 12-month bonds at an interest rate of 2.9%, much lower than the

3.67% rate it paid a month ago.

Italian media later reported that the Prime Minister Silvio Berlusconi and his

cabinet would meet by next Thursday to adopt a series of measures to try to

reduce the government's budget deficit.

Mr Berlusconi and economy minister Giulio Tremonti met business and union

leaders earlier to discuss the measures, which are designed to reassure

investors that the country is serious about tackling its relatively high debt

levels.

Mr Tremonti is expected to address a specially-recalled Italian parliament on

the matter on Thursday.

Safety

Meanwhile, cautious investors continued to hedge their bets in so-called

safe-haven investments, including gold, which hit another new record of record

$1,779.14.

The Swiss authorities announced measures to try to reduce the value of the Swiss

franc, which has also soared as investors seek safe investments, but has been

hurting Swiss exporters.

The afternoon falls put paid to a short-lived rally sparked by an announcement

from the US Federal Reserve late on Tuesday, which said it was unlikely to raise

in interest rates for two years.

This, along with a pledge of further help to aid the economic recovery, if

necessary, gave investors confidence.

But the Federal Reserve's statement also painted a bleak picture of the US

economy, referring to weaker than expected economic growth, depressed household

prices and spending and sluggish unemployment growth.

The fears about the state of the US economy were fanned last week by Standard &

Poor's decision to cut the US's credit rating from AAA to AA+ for the first

time.

On top of this, the continuing debt issues in Europe have prompted many analysts

to revisit their own estimates for both economic and corporate profit growth.

[Guest guest]

It will be interesting to see if the US media continues to ignore the world events that are having an effect on the stock market and keep blaming Republicans for all this.

Also, it is interesting that all of this is coming to a head now combined with riots in the streets and flash mobs of "youth" committing crimes in the US. Also interesting is the Verizon union going on strike and some of its members cutting phone lines and committing other acts of sabotage.

In a message dated 8/10/2011 4:32:58 P.M. Eastern Daylight Time, no_reply writes:

Stock markets fall again as bank shares tumble