World stocks down again as ECB holds fire; euro plunges again on debt crisis fears

World stocks down again as ECB holds fire

LONDON — World stocks slid again Thursday as investors worried that Greece’s debt crisis could spread to other countries even though the European Central Bank’s chief downplayed the risk of market contagion.

In Europe, Britain’s FTSE 100 index tumbled 80.94 points, or 1.5 percent, to close at 5,260.99 while Germany’s DAX fell 50.19 points, or 0.8 percent, to 5,908.26. The CAC-40 in France was 79.92 points, or 2.2 percent, lower at 3,556.11.

No relief was provided by Wall Street — the Dow Jones industrial average was down 95.68 points, or 0.9 percent, at 10,772.44 around midday New York time while the broader Standard & Poor’s 500 index fell 12.35 points, or 1.1 percent, to 1,153.52.

With protests in Athens against new austerity measures culminating Wednesday in the death of three people, markets are worried that Greece could fall out of control or that its fiscal problems could affect other weak countries such as Portugal and Spain.

There were hopes that the European Central Bank would announce new measures — such as buying government bonds — to ease the debt crisis engulfing the eurozone but none were forthcoming.

Instead, Jean-Claude Trichet put the blame for the crisis firmly on the shoulders of Europe’s governments for tolerating lax budgetary controls for years — and before the financial crisis exploded in late 2007.

Though he insisted that the situations in Portugal and Spain were not in the same ball park as Greece’s, investors remain unconvinced that the debt crisis won’t spread. In addition, they are skeptical about the Greek government’s ability to push through the necessary austerity measures required in return for the euro110 billion it is getting from its 15 partners in the eurozone and the International Monetary Fund given the level of civil unrest.

“Given rising speculation this week over potential ECB intervention in the government bond market, the fact that this option was not even discussed among governing council members may have come as a disappointment to the still highly stressed financial markets,” said Frederik Ducrozet, eurozone economist at Credit Agricole.

“Supportive comments about the situation in other deficit countries such as Portugal or Spain did not prevent the euro from falling further,” he added.

By late-afternoon London time, the euro was down 1 percent at $1.2694, just up on the 14-month low of $1.2687 its struck earlier.

Meanwhile, traders in London were cautious ahead of the general election result later.

The pound took a battering, dropping 1.4 percent to $1.4887, as investors fretted that the outcome will be unclear — there’s nothing the markets hate more than uncertainty.

“Failure to see a clear result by tomorrow

Asian stocks had also tumbled earlier, with Japan’s Nikkei 225 stock average diving 3.3 percent to 10,695.69 for its biggest one-day fall in over a year while China’s Shanghai benchmark sank 4.1 percent. Japanese markets were closed Monday through Wednesday for holidays.