European concerns drive stock market lower
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Stock markets were trading lower at midday Wednesday as the optimism over Tuesday’s announcement from the Federal Reserve faded and the concern over the European debt crisis grew.
The Dow Jones industrial average fell as much as 474 points. After a slight recovery it was recently trading down 359.57 points, or 3.2%, at 10,880.20. The broader Standard & Poor’s 500 index was down less sharply.
The slide comes hard on the heels of one of the market’s best recent days. The Dow soared nearly 500 points before the close Tuesday after the Fed announced its intention to keep interest rates low and to consider using additional policy tools to prop up the economy.
Overnight, stock markets in Asia followed Tuesday’s rally in the United States.
Much of the pessimism on Wednesday morning came as investors turned their attention to Europe, and particularly France, which has generally escaped scrutiny as investors focused on Spain, Italy and Greece.
The cost of insuring French debt, an indicator of pessimism about a country’s finances, rose to a record high on Wednesday. France is the most indebted of all Europe’s AAA rated countries, and unlike the United States, which recently lost its AAA rating from Standard & Poor’s, France cannot choose to expand its monetary supply in order to pay creditors.
French President Nicholas Sarkozy called top officials for emergency talks on Wednesday to discuss new ways to cut the country’s deficit.
The three major ratings agencies all reiterated on Wednesday that they have no plans to downgrade France.
France’s leading stock index ended the day down 5.5%.
French banks have helped lead the market down. Societe Generale, the nation’s second-largest bank, fell as much as 23% on Wednesday, but was recently trading down 15%.
The continued whipsawing of stock markets underscores the uncertainty of investors as a growing body of evidence points to a global economic slowdown. A number of market experts, though, have warned that stocks prices have been driven down by panic rather than a change in the economic fundamentals.
‘The markets have moved lower based on fear,’ analysts at First Trust wrote on a note to clients. ‘As a result, the market is once again presenting a buying opportunity.’
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-- Nathaniel Popper