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Global markets: European crisis spurs flight

Fears of a Greek default and credit contagion ripped through markets on Monday.

Written by Agencies | New York |
September 12, 2011 12:06:48 am

Fears of a Greek default and credit contagion ripped through markets on Monday,tumbling European shares to their lowest in more than two years and the euro to a seven-month low against the US dollar.

Concerns that Moody’s Investors Service could downgrade the credit-worthiness of French banks and the lack of a solution to Greece’s debt problem undermined investor confidence and the appetite for risk.

Safe-haven buying briefly pushed yields on benchmark U.S. Treasury 10-year notes to lows last seen at least six decades ago and 10-year Bund yields fell to 1.73 percent.

The euro later rebounded from its low to trade up almost 0.8 percent at $1.3673 to the dollar.

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Shares of French banks Societe Generale,Credit Agricole and BNP Paribas slumped about 10 percent amid expectations of an imminent downgrade,due largely to their exposure to Greek bonds.

Adding to the gloom was the failure of a weekend meeting of finance ministers from the Group of Seven industrialized nations to generate fresh proposals for boosting global growth.

There was hope there would be something more resolute out of the G7 meeting over the weekend,said Ian King,head of international equities at Legal & General,which has 356 billion pounds ($566 billion) under management.

The pan-European FTSEurofirst 300 index of top shares fell 3.2 percent,after earlier slumping to 883.04,its lowest since July 2009. The index has lost more than 20 percent in 2011.

MSCI’s all-country world equity index fell 1.5 percent.

On Wall Street the Dow Jones industrial average was down 16.87 points,or 0.15 percent,to 10,975.26. The Standard & Poor’s 500 Index shed 0.06 points,or 0.01 percent,to 1,154.17. The Nasdaq Composite Index gained 12.13 points,or 0.49 percent,to 2,480.12.

Global central bankers meeting in Basel,Switzerland said economic growth is slowing but there is no sign of a worldwide recession and they had no plans for concerted action.

Brent crude oil fell as much as $1.60 per barrel to a low of $110.17. U.S. crude> slid 72 cents to a low of $86.52.

There are fears about the slowing economy,fears about the debt,fears about default and we are not having coordinated multilateral actions being taken; we are having the opposite,said analyst Robin Bhar of Credit Agricole.

US government debt prices were lower. The benchmark 10-year US Treasury note was down 5/32 in price to yield 1.93 percent.

Against the yen,the euro fell to 103.90 yen,its lowest in 10 years,according to Reuters data.

The dollar was down against a basket of major currencies,with the U.S. Dollar Index off 0.10 percent at 77.118.

Against the Japanese yen,the dollar was down 0.48 percent at 77.18 as the Japanese currency benefitted from safe-haven buying.

Spot gold prices fell $25.21 to $1,832.10 an ounce.

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