More Global uncertainty as we see just how close to the cliff we sit as a world. We know from God’s world that we will have a single world currency and economy during the end times. What will be the trigger that pushes us over. Ireland’s debt? Spain’s debt? Only God knows, so we must be watchful for signs and turn back to him!
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European debt woes hit world markets
LONDON (AP) — A new flare-up in Europe’s debt crisis hit world stock markets Thursday after Ireland announced it would sink more billions into its failed banks and Spain’s public debt rating was downgraded.
Ireland said it would put euro3 billion ($4.1 billion) more into Allied Irish and take majority control. Along with other bailouts, that would push the public deficit above 30 percent of annual economic output, a postwar record in Europe.
Meanwhile, Moody’s Investor Services cut Spain’s public debt rating, a move many in the markets had expected but which confirms that Europe will be slow to emerge from its debt crisis.
Neither development was completely unexpected and market declines remained modest. Britain’s FTSE 100 was down 0.2 percent at 5,561.11 while Germany’s DAX was 0.3 percent lower at 6,230.85. France’s CAC-40 was down 0.8 percent at 3,708.02.
Asian indexes closed lower and Wall Street was expected to slip on the open — Dow futures were down 0.1 percent at 10,770 while Standard & Poor’s 500 futures were 0.2 percent lower at 1,139.
Whereas Spain’s debt downgrade was largely priced in by investors and follows earlier downgrades by other ratings agencies, Ireland’s move to further prop up its banks proved a mixed bag for markets.
“The figures revealed in today’s government statement look awful,” said Sonia Pangusion, analyst at IHS Global Insight, about the Irish bank news.
Ireland estimated that the bailout of Allied Irish could rise to euro34 billion ($46 billion) in a worst case scenario.
However, Pangusion said that providing more detailed figures to the markets has added clarity and should boost confidence over the longer-term. Also, she noted that Ireland’s government is fully funded until June next year, eliminating any fear that it could default on its debt in the near term.
This may be why stock markets have not dropped further, although considering Ireland’s skyrocketing deficit, the government will have to impose more spending cuts, potentially destabilizing the country.
“Further austerity measures are painful when economic activity is poor and the labour market is weak and they generate a political dilemma,” said Pangusion.
Thursday’s announcements from Ireland came a day after labor unions held widespread demonstrations across Europe against governments’ austerity measures. The protests unnerved investors concerned that social unrest could derail the region’s ability and determination to reduce deficits during tough economic times.
In Brussels, meanwhile, finance ministers gathered to debate new rules that would crack down on overspending governments — but disagreements over key elements meant quick consensus seemed unlikely.
Tougher rules are considered necessary to convince markets that the region will be able to avoid a repeat of the debt crisis that is still plaguing it. The EU wants a structure that can overcome individual countries’ unwillingness to reprimand each other over excessive spending.
On top of Europe’s debt problems, investors were worried by reports that some Federal Reserve officials are hesitant to back a new round of asset purchases, the monetary tool the central bank uses to lower market rates and help the economy.
“Because they (the Fed) are not making any firm commitments, we get the idea that they are still not very optimistic about the economic recovery,” said Lee Kok Joo, head of research at Phillip Securities in Singapore.
In Asia, Japan’s benchmark Nikkei 225 stock average lost 190.03 points, or 2 percent, to close at 9,369.35. Sentiment in Tokyo was also sluggish as Japan’s industrial production fell for the third straight month in August.
Thursday’s drop in the Nikkei comes a day after game maker Nintendo slashed its earnings forecast by more than half after announcing its 3-D hand-held game machine, called 3DS, won’t be available in time for the Christmas shopping season. The company’s shares tumbled 9.3 percent Thursday.
The revision also shows Nintendo, which has stood up well among Japanese exporters, is getting battered by the rising yen. A stronger yen reduces profits from overseas sales when the income is brought back to Japan.
South Korea’s Kospi gained 0.3 percent to 1,872.81. Australia’s S&P/ASX 200 shed 1.3 percent to 4,582.9 and Hong Kong’s Hang Seng retreated 0.1 percent to 22,358.17.
Benchmarks in Singapore, India and Taiwan were down while Thailand, Shanghai and Jakarta were up.
In currencies, the dollar fell to 83.26 yen from 83.78 yen. The euro rose to $1.3665 from $1.3622.
Benchmark crude for November delivery was up 16 cents at $78.02 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.20 to settle at $77.86 on Wednesday.
Associated Press writer Pamela Sampson in Bangkok contributed to this report.
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