Market slump suggests EU rescue package may be too late
As Europe rallies behind a rescue plan for the banking sector and the G8 club of most industrialised states are set to hold global talks on tackling the financial crisis, a fresh slump in stock markets indicates the reaction may have come too late to prevent a worldwide recession.
After an initially positive response by markets to earlier initiatives by G7 finance ministers (G8 minus Russia) and a rescue package by the 15-strong euro area at the weekend, gloom descended on stock markets once again on Wednesday (15 October).
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US markets showed the biggest losses, with the New York Dow Jones index undergoing its worst one-day percentage fall in 20 years, closing down almost eight percent, while the Nasdaq lost 8.5 percent and the S&P nine percent.
Similar trends were reported from Asian and European markets, with London and Paris plummeting seven percent and the German DAX 30 6.5 percent.
Asked by journalists at an EU summit in Brussels the same day what would happen if the EU initiative fails to calm markets, French President Nicolas Sarkozy said he is not ready to discuss alternatives to the current plan, stressing "it's a good strategy."
Analysts suggest that while the financial turbulence was sparked by insecurity over banks, the current downturn is mainly due to worsening economic indicators, both in the US and Europe, as well as by signs of a slow-down in major developing economies, such as China.
In the US, consumer confidence has been gravely affected by the constant stream of bad news on finance, with retail sales falling by 1.2 percent in September - the biggest drop for three years.
One of Europe's largest economies, Britain, has seen a sharp jump in unemployment, a half percentage point to 5.7 percent in the second quarter, while analysts expect further rises up to some seven percent next year.