Eurozone dangers prompt a sell-off

US stocks fell yesterday, with selling accelerating late in the session on more warnings about the potential impact of the Eurozone’s debt crisis on the global economy and the banking system.

Worries about growth weighed on sensitive sectors like financials and materials. Losses deepened after ratings agency Fitch said even though the outlook on the US banking industry is stable, it could worsen if the Eurozone’s debt crisis is not resolved quickly.

Earlier, Moody’s cut ratings on various German public sector banks, citing a lower likelihood of external support if it were required.

The S&P financial sector fell 2.5 per cent and the KBW capital markets index dropped 3.6 per cent.

Fears are growing that the Eurozone’s crisis is moving to economies that had been considered more protected from the problems. The yield spread of 10-year French government bonds over their German equivalents widened to a euro-era high.

The Bank of Japan voiced concern about possible negative effects on Japan's growth from Europe’s debt crisis, while England’s central bank slashed its growth forecasts.

Markets sagged overnight as investors reacted to rising yields overseas. The concern is that Eurozone leaders will be unable to enact reforms to reduce debt and promote growth. The US equity market’s swings have become increasingly tied to gyrations in European credit markets.

About 7.4bn shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below this year’s daily average of 8bn shares.

The Dow Jones industrial average lost 190.57 points, or 1.58 per cent, to 11,905.59. The Standard & Poor’s 500 fell 20.90 points, or 1.66 per cent, to 1,236.91. The Nasdaq Composite dropped 46.59 points, or 1.73 per cent, to 2,639.61.

Among declining stocks, computer maker Dell Inc, missed quarterly revenue estimates and its shares fell 3.2 per cent to $15.13.