Down, down, down

Julian Harris
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■ FTSE slumps to 5,393.14, its lowest level this year and 11.3 per cent below May peak

■ £35bn wiped off the value of Britain’s blue-chips; Glencore down 26 per cent since float

■ After a torrid week, Dow Jones suffers its sharpest one day drop since October 2008

STOCKS in Japan collapsed this morning, following a catastrophic day of trading throughout the world yesterday, as lingering debt crises and doubts over the strength of the global recovery terrified investors.

Already-sinking markets went into meltdown after ECB president Jean-Claude Trichet failed to reassure investors that bond-buying would be implemented to prevent contagion in the troubled Eurozone.

Trichet said “you will see what we do [on bond purchases]” yet it was soon revealed that only Irish and Portuguese bonds would be bought, sending markets tumbling.

This morning, Japan’s Nikkei tanked four per cent in early trading. The Dow Jones yesterday dropped nearly 513 points or 4.3 per cent, its worst decline since 2008.

The S&P 500 had its worst one-day percentage drop since February 2009, falling over 60 points (4.78 per cent). The Nasdaq fared worse, losing over five per cent. Chaos struck equity markets, with the CBOE Volatility Index jumping by 35 per cent, its highest leap since 2007.

Today all eyes will be on the US non-farm payroll data, a key indicator for the American jobs market. The figures showed a pitiful increase of 18,000 new jobs in June. New claims for unemployment benefit came in at 400,000 yesterday – only slightly down from last week.

Despite agreeing to raise the debt ceiling, pared-down growth forecasts have marred America’s week.

On this side of the Atlantic the FTSE slumped yesterday, closing lower for the fifth consecutive trading day. The blue chip index lost 3.4 per cent on worries over the Eurozone and global economic prospects. Commodity trader Glencore tumbled seven per cent.

The Euro STOXX 50 index fell by 3.3 per cent, to close at 2,414.97 points, its lowest since mid-2009. European Commission president José Manuel Barroso called on leaders to accelerate changes to the region’s €440bn bailout fund through their parliaments so that it can start intervening in bond markets and funding EU banks.

And he pleaded with Europe’s political elites to stop stoking the crisis through “undisciplined communication” and suggested that they agree quickly to boost the fund’s size. Analysts have said the fund needs to be boosted to €1 trillion to shore up confidence, which will further enrage taxpayers in Europe’s paymaster economies like Germany.

But Barroso issued a warning in a bid to get politicians to act against voter pressure: “It is clear that we are no longer managing a crisis just in the euro-area periphery.”
Even gold and silver fell in price as the value of investors’ collateral on trading positions plummeted, triggering margin calls from brokers and forcing them to sell high-value assets to close their positions or post more collateral.