European Markets Slide 3%; G20 Statement Ring Hollow

Devan Biswas
23 Sep, 2011
New York City

European markets dropped for the third day in a row after a joint statement from G20 nations failed to offer any specific new initiatives. The fire storm of talks in Washington among policymakers and world finance leaders has failed to convince world markets.

[R]3:00 PM Frankfurt – European markets dropped for the third day in a row after a joint statement from G20 nations failed to offer any specific new initiatives. The fire storm of talks in Washington among policymakers and world finance leaders has failed to convince world markets.[/R]

European markets extended their losses for the third day in a row after a statement from G20 failed to offer new insights. The indexes began their slide in the early morning and gathered downward momentum in the afternoon.

On late Thursday evening Group of 20 nations issued a joint communiqué that reiterated their commitment to the stability of financial markets and world banking system. However, the statement lacked fire power to convince investors and offered no new initiatives or concrete actions.

The indexes in the Europe decline sharply by later afternoon.

The DAX 30 index fell 3.5% or 179.38 to 4,984.83, CAC-40 index declined 3% to 2,697.07 and Swiss Market Index decreased 2.7% to 5,147.65.

The market indexes in Athens declined 2.4%, in Milan fell 2.6%, in Stockholm dropped 3% and in Spain edged down 2.3%.

European banks faced another round of sell off after comments from Greece and finance ministers at a meeting of G20 nations in Washington and annual meeting of World Bank and the International Monetary Fund only added to confusion.

The time for Greek bailout is quickly closing and market jitters are on the rise. Greece is focused on implementing another round of austerity measures that will trim government payroll by 30,000 and freeze pensions and raise taxes.

However, Greece is still expected generate deficit in the current and the next year before it can balance its budget in 2013, even when the country does not repay loans in the next two years.

Greek bond yields are forecasting that banks may have to agree on a much higher losses than the 21% bond losses agreed in the swap that is expected to be completed in mid-October after the release of 8 billion euros tranche of bailout.

In Asian markets, export sensitive countries’ indexes led the decliners in the region. Market indexes in Hong Kong extended losses by 1.4% decline to 6.2% loss in two days and in India losses accumulated to 5.3% after 1.2% loss today.

Markets in Tokyo were closed today and the index in the export driven economies like South Korea plunged 5.7% and in Taiwan declined 3.6%. Philippines, New Zealand, Indonesia and Singapore declined smaller fractions.