World stocks slide on Greek debt, US jobs fears

By PAN PYLAS
AP
posted: 10:14 AM 02/25/10

LONDON -Greek shares led a retreat in world markets Thursday as investors worried that credit ratings agencies may downgrade the country's government debt further. Disappointing U.S. jobs data added to the gloom, sending Wall Street sharply lower at the open.

In Europe, the FTSE 100 index of leading British shares was down 67.30 points, or 1.3 percent, at 5,275.62 while Germany's DAX slid 76.98 points, or 1.4 percent, to 5,538.53. The CAC-40 in France was 55.79 points, or 1.5 percent, lower at 3,659.89.

The worst performing main index in Europe was the composite index in Athens, which was down 3.3 percent at 1,863.8.

And on Wall Street, the Dow Jones industrial average was 145.78 points, or 1.4 percent, lower at 10,228.38 soon after the open while the broader Standard & Poor's 500 index fell 15.91 points, or 1.4 percent, to 1,089.33.

Worries about Greece continued to be the main talking point in markets, overshadowing more assurances from U.S. Federal Reserve Chairman Ben Bernanke that borrowing costs will stay at rock-bottom lows for a while yet.

Any hopes that Greece could slash its budget deficit by four percentage points to 8.7 percent of GDP this year were diminished as leading credit rating agencies Standard & Poor's and Moody's warned that they may downgrade the country's debt even further in the coming weeks or months.

A two-notch downgrade would take S&P's rating on Greece to BBB- — the lowest level accepted by the European Central Bank as collateral for loans to banks. Moody's current rating on Greece is A2, but that looks like it could be a matter of history soon.

"This morning Moody's warned that it may cut Greece's credit rating unless the government provides reassurances that it will not significantly deviate from plans to cut its budget deficit," said Jane Foley, research director at Forex.com. Foley cited Wednesday's wide-ranging strikes in Greece against the government's austerity program.

"With strike action suggestive of public opposition to deep fiscal cuts, the market remains skeptical of the ability to manage this," said Foley.

The euro was once again on the retreat in the wake of the latest developments over Greece's debt crisis — by mid afternoon London time the euro was down 0.4 percent at $1.3484, not far off its nine-month low of $1.3444 hit earlier this month.

Aside from Greece, investors are also increasingly concerned that the global recovery from recession is proving to be less buoyant than previously thought, meaning that share prices could be too high.

Weekly U.S. jobless data did not nothing to assuage those fears, which were stoked earlier this week by awful U.S. consumer confidence figures.

The Labor Department said first-time claims for unemployment insurance rose by 22,000 to a seasonally adjusted 496,000, largely because of heavy snow on the Atlantic Seaboard. The consensus in the markets was for a decline to 455,000.

"The downward trend in jobless claims appears to have flattened out at a still historically high level," said Paul Ashworth, senior U.S. economist at Capital Economics. "That is not good for the employment outlook."

Investors are also monitoring Bernanke's testimony to the Senate, though there are doubts whether he will say anything different to what he relayed to the House of Representatives Wednesday.

Bernanke told the lower house that low rates were needed "for an extended period" to help keep the economic recovery on track and Americans hard-hit by high unemployment and falling housing prices.

Earlier in Asia, the Nikkei 225 stock average fell 96.87 points, or 1 percent, to 10,101.96. Shares of Toyota Motor Corp. edged down 0.2 percent after president Akio Toyoda, appearing before U.S. lawmakers, apologized for safety lapses that have led to deaths and widespread recalls.

South Korea's Kospi lost 1.6 percent to 1,587.51 and Hong Kong's Hang Seng fell 0.3 percent to 20,399.57.

Elsewhere, Australia's market dropped 1.2 percent while Shanghai's benchmark defied the downward swing, rising 1.3 percent.

Oil prices fell sharply, alongside stocks, with benchmark crude for April delivery down $1.93 at $78.07 a barrel.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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Source: http://www.dailyfinance.com/article/world-stocks-slide-on-greek-debt-us-jobs/646657/?flv=1

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