an electronic board displays market indices from around the
world outside a brokerage in Tokyo. Photo by Reuters.
Sharemarkets in the United States and Europe took a
caning on Thursday, from a combination of Argentina having
defaulted on some debt, weaker than expected corporate results
and US interest rate policy.
The US Federal Reserve cut its monthly bond-buying programme
- the sixth consecutive $US10 billion ($NZ11.76 billion) cut
- from $US35 billion down to $US25 billion.
This week Argentina, South America's third-largest economy,
defaulted for the second time in 12 years after the failure
of last-ditch talks with hold-out, hedge fund, bond
In New York, the Dow Jones Industrial Average fell 1.9%, to
16,563.30, the S&P 500 shed 2%, to 1930.67 and the Nasdaq
composite index 2.1%, to 4369.77.
In Europe and Asia, the Stoxx Europe 600 retreated 1.3%, the
United Kingdom's FTSE 100 lost 0.6% and the MSCI Asia Pacific
Index slipped 0.3%.
The Argentinian predicament, an end to a buoyant five-month
US stock run and rising concerns in Portugal have investors
spooked over a relapse in global economic recovery.
Craigs Investment Partners broker Peter McIntyre said the
''selective default'' by Argentina in not reaching an
agreement over bond repayment kept investors ''in a downbeat
''The world is watching, they don't want the contagion to
catch from Argentina ... no-one wants to see a major
sovereign default,'' he said.
Unfolding geopolitical events in the Ukraine and Middle East
were also unnerving investors, he said.
US stocks had ''tumbled'' on the last day of May, with the
Dow Jones turning negative for the year, down 0.1% in 2014,
''The S&P 500 and Dow industrial had their first down
month since January,'' he said.
While the Fed's withdrawing of a further $US10 billion from
the monthly stimulus package was expected by the markets, it
raised the question of when US interest rates would start an
upward move, he said.
''There was a raft of disappointing earnings reports from
European heavyweights, which pushed the benchmark stock index
to the lowest close since April,'' he said.
There was also another ''soft'' inflation reading from the
euro zone, which offered little consolation to the markets,
On opening yesterday, the Australian sharemarket was sharply
down, both the benchmark S&P ASX200 index and broader All
Ordinaries index down 1.18%..
Forsyth Barr broker Andrew Rooney said US shares had slumped
amid weaker-than-expected corporate results, with declines in
Exxon and Murphy Oil stocks driving energy companies to the
biggest decline among 10 industries in the S&P 500 index.
European and UK stocks also sank, Adidas having slumped 15%,
its biggest decline in 15 years, citing the Ukraine crisis
would reduce profits from Russia.
Banco Espirito Santo plunged 42% on making provisions for a
$US5.7 billion loss.
Shares in stricken Portuguese bank Banco Espirito Santo (BES)
plunged 42% when trading was resumed after a suspension,
dragging down the entire Lisbon stock market.
The market value of BES fell by nearly 1 billion ($NZ 1.57
billion) in a minute when the shares fell first by 51.01% to
The collapse followed the bank's publication late on
Wednesday of a first-half loss of 3.57 billion.
This was the biggest loss ever reported by a bank in
Portugal, owing to exposure to the debts of its parent,
Espirito Santo Group.
The bank is the biggest private bank in Portugal.
• Additional reporting: AFP