Stock Markets: Turbulent week ends with further losses

FTSE 100 plunged below the 5000 mark.

FTSE 100 plunged below the 5000 mark.

Major European share markets closed lower on Friday, ending another turbulent week. London’s FTSE 100, the index of the city’s leading shares, plunged below the 5000 mark as British bank shares fell to their lowest levels in more than two years yesterday amid fears of a new funding crisis.

Banks shares dive amid debt crisis

More than £62bn was wiped off the value of the UK’s leading companies, leading to the heaviest fall in bank shares since the financial crisis of 2008. Shares in Lloyds Banking Group, Royal Bank of Scotland (RBS), HSBC and Barclays suffered the greatest fall, reaching levels of a two year low.

Barclays shares fell the most at 11.5%, losing almost a fifth of its value during this turbulent week. RBS followed with an 11.3% drop. HSBC closed with the lowest fall of the UK’s major banks at 6%.

Fears of a funding crisis in the European banking system were blamed for the collapse in share prices, which has seen Barclays, Lloyds and RBS lose more than 40% of their market value so far this year.

The week’s total losses on the FTSE 100 amount to £72.7bn, of which £13.4bn fell from the value of Britain’s biggest companies yesterday alone in the final five sessions of the week.

Continued fears about a slowdown in the global economy and high levels of debt in the eurozone had driven indexes lower for much of the week. At certain stages, European markets were substantially lower, with falls of more than 3% for some leading indexes.

The result of heavy losses leave the 100 index down 13% on the month, with the German and French markets experiencing greater losses at 24% and 18.3% respectively.

Banks warn Europe and US close to recession

Morgan Stanley warned yesterday that Europe and the US were “dangerously close to recession” despite efforts to stimulate economies and revive growth.

The continuing turmoil in global stock markets in addition to the escalating sovereign debt crises is leading banks to forecast the near-stalling growth of the developed world cautiously.  Since the height of the crisis in 2008, none of the major economies have fully regained the losses sustained during the recession and global share prices remain almost a third lower than their peak.

Traders and investors continuing to dump stocks amid continued fears of a new crisis have raised the prospect of the authorities placing a ban on short-selling.

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