US Stock Advance as Asian, European Markets Fall

Posted August 5th, 2011 at 2:40 pm (UTC-5)
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U.S. stock indexes advanced on Friday in a volatile day of trading, even as Asian and European markets fell amid fears that the global economy was headed to a new downturn.

The American markets teetered between gains and losses, but moved ahead on news that debt-plagued Italy will speed up a package of austerity reforms to balance its budget in 2013, a year earlier than originally planned. Italian officials pledged to work toward approval of a constitutional amendment requiring the government to balance its budget.

Italian Prime Minister Silvio Berlusconi said in Rome that the finance ministers of the world’s leading economies would meet “within days” to discuss the burgeoning financial crisis that in the last few days has led to a significant drop in the value of stocks at exchanges across the globe.

Asian stock markets dropped sharply Friday, following Thursday’s steep sell-off in the United States, and European markets followed with more losses.

U.S. markets rose after a government report showed the nation’s unemployment rate declined slightly last month, but then fell. By mid-afternoon the widely watched Dow Jones Industrial Average of 30 key stocks was ahead 1 percent and other indexes increased as well.

The U.S. economy has largely stagnated this year, adding to the worries for investors already deeply concerned about the spreading debt contagion for European governments. The U.S. report said the economy added 117,000 new jobs last month, more than expected, but still below the figure required for sustained economic growth.

On Friday, Tokyo’s Nikkei index closed down 3.72 percent, to its lowest level in five months, and Hong Kong’s Hang Seng plunged more than 4 percent.

Stock indexes in both London and Frankfurt dropped by more than 2.7 percent. The Paris exchange fell 1.3 percent.

In the United States on Thursday, the Dow index suffered its biggest drop since October 2008, plummeting 513 points, or 4.3 percent. Other major stock indexes, the NASDAQ and the S&P 500, also fell sharply. Financial analysts say investors are concerned the U.S. economy could be headed back into a recession, which would be its second in three years.

The U.S. is the world’s largest economy, but investors have voiced little confidence in the country’s sluggish recovery, even with the agreement this week by U.S. President Barack Obama and Congress to increase the nation’s borrowing limit and avoid an unprecedented default on the government’s financial obligations.