European debt woes slump global stocks

08:27, May 05, 2010      

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The Dow Jones dived 225 points in a sell-off fueled by fears that the EU's $146-billion bailout plan for Greece won't be enough to keep instability from spreading to other countries.

Investors also were unnerved by fear of a potential slowdown in China, as a report suggesting a weakening factory sector followed news of Beijing's latest effort to cool the country's surging growth.

Investors worried that a $146-billion bailout for Greece wouldn't stop the crisis from engulfing Spain, Portugal and other European countries, destabilizing their economies and restraining the global economic rebound.

The twin developments overseas outweighed encouraging economic data in the U.S., where home sales climbed 5.3% in March and factory orders climbed the most in two-and-a-half years.

The Dow fell 225.06 points, or 2%, to 10,926.77, while the Standard & Poor's 500 index slumped 2.4%. The Nasdaq composite index, many of whose technology companies rely on sales abroad, sank 3%.

Losses were steeper closer to the crisis. Key indexes plunged 7.4% in Greece, 5.4% in Spain and 4.7% in Italy.

The euro slumped to a one-year low against the dollar, ending New York trading at $1.30. It had topped $1.50 in November.

Yields of European government bonds surged as investors fretted about the risk of default. Meanwhile, U.S. Treasury bonds rallied, pushing their yields down, as investors sought their perceived havens. The benchmark 10-year Treasury note fell to 3.61% from 3.7%.

A report showing the slowest manufacturing growth in China in six months also spooked investors, who are counting on fast growth in China and other emerging countries to offset the economic lethargy of developed nations.

China's Shanghai stock index closed 1.23 percent lower Tuesday at 2835.28 points, with financials and property shares leading the slump.

People's Daily Online


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