Aug. 5 - European shares fell to 14-month lows, continuing the global sell-off over growing concerns the U.S. economy could be heading for another recession, and the euro zone debt crisis could spread to Italy and Spain. Joanna Partridge reports.
It looked like the start of another day of falls as the Frankfurt stock exchange opened, following on from the slide in Asia and U.S. European shares have slipped to the lowest level in over a year over worries about the state of the U.S. economy, and concerns the euro zone debt crisis may spread to Italy and Spain, says trader Robert Halver. SOUNDBITE: Robert Halver, Trader at Baader bank, saying (English): "We have policy crisis on a worldwide basis. We want to see how can America, how can Euroland go along with a perspective, how is it able to get the economic things off the table. And now we are not ready and not able obviously on a political basis to solve these problems." Frankfurt's volatility index, a measure of how worried investors are, also hit a 14-month high as they sold off stocks and fled to safe havens like gold. The euro has risen slightly against the dollar and the pound but traders aren't convinced the single currency can maintain its gains. Some analysts are accusing politicians of not doing enough to stop the stock market slump, says Michael Hewson from CMC markets. SOUNDBITE: Michael Hewson, CMC Markets, saying (English): "What you've got at the moment is paralysis of policy, essentially, because you've got European leaders on holiday, talking to each other on the phone, with no prospect whatsoever of the bailout fund getting increased to the required level to nip this in the bud." When it comes to Europe, the markets are especially concerned the debt crisis is spreading to large economies like Spain and Italy, which are seen as "too big to fail". And if Rome and Madrid did end up needing a bailout, it would cost more than what's left in Europe's financial rescue fund. The Bank of Spain has called on the EU to bring in measures to fight the crisis after Madrid's latest growth figures disappointed. And while the pressure increases on Europe to act, European stocks continue to fall. Joanna Partridge, Reuters