LONDON: European stock markets slid yesterday and the euro fell against the dollar as traders expected US President Barack Obama’s re-election to be challenged quickly by a looming fiscal crisis, and the EU issued gloomy growth forecasts.
After rising in early exchanges as investors welcomed an end to the US political drama, equities and the European single currency headed south as attention switched to the challenging months ahead.
At the close of trading, London’s FTSE 100 index of top companies had lost 1.58 percent to 5,791.63 points, Frankfurt’s DAX 30 retreated 1.96 percent to 7,232.83 points and in Paris the CAC 40 shed 1.99 percent to 3,409.59. Madrid’s IBEX index lost 2.26 percent to 7,660.70 points as Spain’s growth prospects grew darker.
In New York, US stock markets tumbled on expectations that Obama’s re-election will set up a tough battle with Republicans over a feared “fiscal cliff”.
Automatic US tax and spending measures totalling about $600bn are scheduled for January 1 to curb a swollen US public deficit and debt if a compromise on graduated measures cannot be agreed between Obama and the US Congress. In midday trades, the Dow Jones Industrial Average gave up 2.49 percent, the broad-based S&P 500 fell 2.46 percent and the Nasdaq Composite shed 2.56 percent.
Analysts expected Obama’s victory to spell status quo for the Federal Reserve’s relaxed monetary policy. “An Obama victory ensures the continuity of the US monetary policy, which is likely to be kept loose,” SHK Financial strategist Daniel So told Dow Jones Newswires.
But after a brief rise versus the US currency, the euro fell to $1.2763 in late London deals, compared with $1.2814 late in New York on Tuesday. The European single currency reversed direction as the European Commission slashed its eurozone economic growth forecast for next year to just 0.1 percent, six months after tipping a much stronger recovery of 1.0 percent. Official data also revealed slumps in German and Spanish industrial output in September.
In Greece, lawmakers were to vote on austerity measures needed to unlock international aid and stave off bankruptcy despite strikes and public anger against billions more euros in tax hikes and pension cuts. The package includes ¤18.5bn ($23.6bn) in new spending cuts and other reforms by 2016.
Among corporate stocks, Munich Re shares closed with a loss of 0.20 percent at 127.35 euros in Frankfurt.
Asian stock markets closed mixed earlier in the day, while on the London Bullion Market, gold prices climbed to $1,715.25 an ounce from $1,691 on Tuesday.
AFP
