World markets tumble on fears over Hungary
World stock markets tumbled today, dragged down by weak US employment figures and fresh fears that Europe's debt crisis is spreading to Hungary.business Updated: Jun 07, 2010 15:03 IST
World stock markets tumbled on Monday, dragged down by weak US employment figures and fresh fears that Europe's debt crisis is spreading to Hungary.
Oil was also buffeted, falling to near $70 a barrel, while the dollar fell against the yen and gained versus the euro. Wall Street was poised to open lower. Dow futures shed 66 points, or 0.7 per cent, to 9,880 while the broader Standard & Poor's 500 futures dropped 6.6 points, or 0.6 per cent to 1,059.60.
Selling was sparked in Asia on fears that Europe's debt problems could spread after Hungarian officials said last week the nation was at risk of a Greek-style fiscal crisis.
The comments shocked investors, pushing the euro to a fresh four-year low against the dollar. Hungary is part of the European Union, but keeps its national currency - the forint, which dropped around 5 per cent last week.
"The problem seems like a cancerous thing - it's spreading from smaller country to smaller country, and many people are
afraid that it will spread to a big country like France or Germany, although that's unlikely," said Jackson Wong, vice president at Tanrich Securities, in Hong Kong.
"We don't have major good news on the horizon. We still have crises down the road."
Major European stock indexes were lower in early trading. The FTSE 100 index of leading British shares slid 85.28, or 1.67 per cent, to 5,040.60 while Germany's DAX sank 79.26 points, or 1.3 per cent, to 5,859.75. The CAC-40 in France stood at 3,387.74 points, lower by 2 percent or 67.11 points.
Asian indexes closed sharply lower Monday: Japan's benchmark Nikkei 225 stock plunged 380.39 points, down 3.8 per cent, to 9,520.80 with investors also cautious before Japan's new leader, Naoto Kan, forms his Cabinet on Tuesday.
South Korea's Kospi lost 1.6 percent to 1,637.97 while Australia's S&P/ASX 200 was down 2.8 per cent at 4,325.9. Hong Kong's Hang Seng dropped 2 per cent to 19,378.15. Benchmarks in mainland China, Singapore and Taiwan also slid.
Apart from Hungary's woes, markets were also knocked down by disappointing US jobs data. The US government's May jobs report showed on Friday the US economy created 432,000 jobs last month, far fewer than the expected 513,000. Most of the jobs were temporary hiring by the government for the US census.
The result underlined that the US economic recovery is not yet picking up the momentum that investors have been looking for. The Dow Jones industrial average plunged Friday 3.2 per cent to 9,931.97. Major indexes all lost more than 3 per cent.
Castor Pang, director of research at Cinta International in Hong Kong, said the jobs figures were "much poorer than expected" and a key factor in driving down Asian stocks. Markets were likely to seesaw throughout June.
"Volatility is very great due to lack of confidence," Pang said, calling some investors "very fearful."
Investors seeking the safety of the U.S. dollar helped lift it against the euro Monday. The euro fell as low as $1.1878 - falling below $1.19 for the first time since March 2006 - before pulling up to $1.1922 in early European trading. That was still below the $1.1943 it bought in New York on Friday.
The dollar fell against the Japanese currency, falling to 91.46 yen from 91.80 yen.
Benchmark crude for July delivery was down $1.20 to $70.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $3.10 to settle at $71.51 on Friday.