NEW YORK (BDCi) – In the continuing roller coaster also known as the global economy, Wednesday morning saw major European and United States indices drop significantly, cutting deeply into Tuesday’s “snap-back” rally gains. The Dow was down 3.5% in early Wednesday trading, and most major European stock indices were down in the range of 2-4%. Bovespa is thus far down almost 2% to the low 50,000s. This time it wasn’t the United States economy directly driving the drop. France became an item of concern to investors as large French bank stocks absorbed double digit percentage losses due to the reporting of huge debts on their balance sheets from Italy. French bank Societe General saw its stock plummet 16%, and BNP Paribas’ stock declined 13.2% on news that all French banks are financing Italy to the tune of approximately $350 billion. Italy, like Greece, is struggling with huge government deficits that are causing a crisis of confidence among Italy’s bondholders, which in turn is driving bond rates higher, and adding to the debt that Italy must service. Late last week, Prime Minister Silvio Berlusconi announced plans to speed up reforms and balance the government’s budget by 2013. The plan appeased the European Central Bank, but concerns over the lack of details of such a move are still causing worry in the investor community.
Asian stock indices closed up, a reaction to yesterday’s United States Federal Reserve statement, but are surely to be challenged when they re-open later today.
By Don Weinstein Source: Reuters Photo courtesy of Reuters 10 August 2011
8:18a.m. P.D.T.