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World stocks slump on banking, retailing fears

World stocks slump on banking, retailing fears

European and US stock markets slumped Wednesday after some dismal U.S. retail sales data and amid renewed concerns about the financial well-being of the banking system.
The sharp sell-off in Europe gathered pace when Wall Street opened sharply lower on the news U.S. retail sales fell 2.8 percent in December from the previous month, more than double the 1.2 percent decline expected.
Even though around a half of the fall was due to the impact of falling gasoline prices on gas station sales, the markets were spooked by the extent to which consumers in the U.S., who account for some 20 percent of the world economy, reined in spending over the crucial Christmas trading period despite heavy discounting by businesses.
The FTSE 100 index of leading British shares was down 237.10 points, or 5.4 percent, at 4,162.05, while Germany's DAX fell 202.41 points, or 4.4 percent, to 4,434.53. France's CAC-40 was 113.14 points, or 3.5 percent, lower at 3,084.75.
On Wall Street, the Dow Jones industrial average slid 234.88 points, or 2.8 percent, to 8,213.68 while the broader Standard & Poor's 500 index fell 26.23, or 3.0 percent, to 845.56.
"The rally (in the markets) before Christmas and over the Christmas period was predicated on there being a recovery in the second half of the year but I think you can write this year off in terms of an economic recovery," said Neil Mackinnon, chief economist at ECU Group in London.
The economic and corporate news across the world has been dire in the early days of 2009, with trade on the slide and businesses slashing jobs.
The economic woes afflicting the world economy were highlighted Wednesday by the news that technology giant Nortel Networks Corp. has filed for bankruptcy protection amid sharply lower orders from phone company clients.
Meanwhile, companies around the world are struggling to make ends meet because cash-strapped banks continue to batten down the hatches to get their finances in order.
The financial health of the world's banks resurfaced as another major concern in markets Tuesday with the confirmation that Citigroup Inc. is to merge its Smith Barney brokerage into a joint venture with Morgan Stanley, relinquishing control in exchange for $2.7 billion in badly needed cash.
Royal Bank of Scotland PLC, which is now majority-owned by the British government, also said it was raising around 1.7 billion pounds ($2.5 billion) by selling its 4.3 percent stake in Bank of China.
In addition, analysts at Morgan Stanley said HSBC PLC, Britain's biggest bank by market capitalization, may have to raise between $20-30 billion and halve its dividend to plug a capital shortfall as earnings deteriorate by more than anticipated.
"While HSBC is winning market share we do not think this will be enough to offset the negative cyclical and structural trends," Morgan Stanley's analysts said.
HSBC's shares fell a massive 10.3 percent, while Barclays PLC slumped 13 percent after it confirmed that it was culling 2,100 staff from its retail and commercial banking arm. Royal Bank of Scotland fell 10 percent, despite its modest fundraising.
Meanwhile Deutsche Bank AG, Germany's biggest bank, reported a


Updated : 2021-05-06 16:11 GMT+08:00