World markets slump on double dose of bad news
Germany feeling the impact of European Union malaise
World markets sold off Friday, after Moody's downgraded 15 major banks and a report on German confidence was worse than expected.
After the close of U.S. trading Thursday, Moody's Investors Service downgraded 15 banks, including giants like Bank of America, Goldman Sachs and JPMorgan.
That weighed on European and Asian markets, which were closed when the downgrades were announced.
London's FTSE 100 closed 1% lower Friday, the CAC 40 in Paris was down 0.8% and the DAX in Frankfurt slid 1.3%. But all three indexes managed to eke out gains for the week, although less than 1%. The Euronext index fell 0.8% on Friday, but it was also higher overall for the week.
The Hang Seng in Hong Kong closed lower by 1.4% on Friday, down 1.2% for the week; while Tokyo's Nikkei 225 slipped 0.3% at the close but managed gains of 2.7% for the week. The Shanghai Composite was closed for a holiday on Friday, but was down 1.5% for the week.
Another day of weak data from Germany added to market pessimism on Friday.
"The German Ifo data was pretty soft, a two-year low," said Kathy Jones, fixed income strategist for Charles Schwab. "Now the recession is spreading to all the countries throughout Europe."
The closely watched Ifo Business Climate Index for industry and trade in Germany fell to its lowest level since March 2010, and companies had "far lower" expectations for the next six months.
That came a day after a purchasing managers report showed conditions deteriorating for the second straight month in Germany.
Germany, a bastion of economic strength amid its mostly stagnant European neighbors, sends 60% of its exports to other European Union members. It is now feeling the impact from the surrounding malaise, Jones said.
"If you're going to have that much of a downturn in Europe, it's going to be felt in Germany, as well," she said.
The recession is certainly being felt in Spain, where the banking industry needs a cash injection of € 62 billion just to stay afloat, according to an independent audit published Thursday. After selling off Thursday, U.S.-listed shares of Banco Santander and BBVA rebounded by more than 3% Friday.
Spanish debt is also still expensive, with the average yield for its 10-year bond trading at 6.4%.
On the domestic front, Wall Street rebounded after getting Thursday's nasty session out of its system. S&P 500, Nasdaq and Dow Jones industrial average were all higher on Friday, making modest gains of less than 1%.
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