MercoPress. South Atlantic News Agency

World markets collapse on fears of Euro zone debt problems

Jean-Claude Juncker, head of Euro-group Finance ministers said Portugal and Spain posed no risks to Euro stability

Concerns about the US economy and the potential spread of debt problems in the Euro zone (Greece, Portugal and Spain) have led to large falls in world stock markets. US and key European markets lost more than 2% while those in Spain and Portugal fell by more than 5%.

In the US, worse-than-expected levels of unemployment benefit claims added to worries about the pace of recovery.

In Latinamerica main stock markets also dropped significantly: Brazil’s Bovespa was down 5%; Argentina’s Merval, 3.8%; Chile 2%; Mexico’s IPC, 2.2% and in Peru the blue chip market lost 3.47%.

Analysts said the negative sentiment was largely behind the price of US crude oil falling by about 5%. Brent crude fell by $4.31 to $72.67 a barrel in New York having gone as low as $71.47. In London, Brent crude slipped by $4.27 to $71.65 a barrel.

European markets suffered as a lack of demand for government bonds in Portugal re-ignited concerns that countries such as Portugal and Greece (and Spain) would not be able to fund their national deficits without a bail-out.

In London, the FTSE 100 index closed at its lowest level in three months, shedding 2.2%, 113.8 points to 5,139.31. Meanwhile France's Cac-40 index slipped 2.8% and Germany's Dax-30 lost 2.5%.

However Jean-Claude Juncker, head of the Euro-group of finance ministers, said on Thursday that neither Spain nor Portugal posed risks to Euro zone stability.

In the US, where claims for unemployment benefits rose by 8,000 to 480,000 last week according to Labour Department figures, markets reacted badly.
It was the fourth increase in the past five weeks and the number of lost jobs was the highest in two months.

The Dow Jones was down by 270 points or 2.6% to below the psychological 10,000 points barrier for the first time since November last year. Meanwhile the Nasdaq index slid 3% to 2,125.43.

The falls in European and US markets were similar to those experienced in mid-January, when China's attempts to curb its growth brought concerns that other world economies would feel the impact.