Debt crisis: Panic on Wall Street, stonewalling in Europe

Friday, May 7, 2010
By Paul Martin

• Weak ECB statement on debt crisis undermines euro
• Report of $16bn US trading error adds to market chaos

Phillip Inman and Nils Pratley

Wall Street was gripped by a fresh panic tonight as fears spread that the Greek debt crisis will trigger a new catastrophe for the fragile global banking system.

The chaos was compounded as one major bank was said to have made a big trading “error” by trying to sell a huge number of shares by mistake.

The blue-chip Dow Jones index briefly fell almost 1,000 points, or 9%, dipping below 10,000 points for the first time since early February, before halving its losses in the next 30 minutes. It closed 348 points, or 3.2%, lower at 10514.

The confusion over prices in a dramatic half-hour of trading will alarm regulators. One report said a bank’s computer had attempted to sell $16bn of shares instead of $16m. An inquiry is inevitable.

Shares in Procter & Gamble – a blue-chip household name – fell from $62 to $39 in five minutes before rebounding. Shares in Apple and Accenture were also affected. It was unclear whether any trades were executed at the lower prices.

Even before the drama, world stock markets were falling after the European Central Bank gave a statement that investors dismissed as a “do nothing” response to fears of wider contagion from Greece.

The sell-off on Wall Street will cast a long shadow over the City of London, already nervous about the result of the general election. Shares in London – where trading closed before the mayhem in New York – were down, with the FTSE 100 index finishing 81 points lower at 5261, making a near-10% decline since mid-April. Futures markets were flagging big falls on Friday.

Currency markets were also rocked. The euro fell more than two cents against the dollar to $1.26. Sterling lost almost three cents to trade at $1.48.

The European Central Bank governor, Jean-Claude Trichet, said Spain and Portugal were “not Greece”, and that the ECB governing council had not discussed injecting extra funds into the eurozone to boost demand and economic growth.

The Rest…HERE

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