Stocks Plunge in US, Europe Amid New Worries of Global Downturn

Posted August 4th, 2011 at 1:10 pm (UTC-5)
Leave a comment

Stock markets plunged in the United States and Europe on Thursday amid new concerns that the world may be headed toward another sharp economic downturn.

Key stock indexes in the United States dropped by more than 2 percent in midday trading, nearly wiping out accumulated gains for 2011. The U.S. losses came as major European exchanges closed even lower, down by nearly 4 percent.

Investors sold their holdings as indicators around the globe pointed to official worries about the state of the economies in the United States, Europe and Japan.

A U.S. report showed new evidence of the country's weak labor market.

A total of 400,000 unemployed workers made their first claims for jobless benefits last week, a figure that was down only slightly from the week before. Financial experts say the figure has to drop to below 375,000 and stay there awhile to give U.S. companies enough confidence in the national economy to hire more workers.

Meanwhile, the European Central Bank said it had resumed purchase of bonds from indebted governments. It was an effort to try to keep Italy and Spain from being engulfed in the continent's debt contagion that has already forced Greece to secure two international bailouts in the last year and Ireland and Portugal one apiece.

The central bank also said it would provide more emergency credit to banks that hold large amounts of bonds issued by debt-ridden European governments.

Japan pledged to inject $126 billion into its economy, an effort to weaken the yen so that the country's exports might prove more attractive to overseas buyers.

The U.S. has the world's largest economy, but investors have voiced little confidence in the country's sluggish recovery. They shrugged off the impact of the agreement this week by President Barack Obama and Congress to increase the nation's borrowing limit and avoid an unprecedented default on the government's financial obligations.

Instead, traders have dumped stocks as first, one report showed the pace of manufacturing has fallen to a two-year low, and then the unemployment claims number was only marginally improved.

On Friday, the U.S. is releasing its monthly unemployment for July, but experts do not think it will be changed from June's 9.2 percent figure.