11 Aug 2011

US, European share markets tumble

11:20 am on 11 August 2011

US and European stock markets have suffered more large falls triggered by worries that Europe's debt crisis could engulf French banks and eventually spill into the US financial sector.

Rumours about the health of French banks sparked concern that the euro zone's debt crisis could claim new victims.

The French government and the three main ratings agencies denied France would follow the United States and lose its top-grade AAA credit rating.

Despite this, French bank stocks tumbled and led European markets lower while US stocks fell more than 4%.

The Societe Generale bank, whose shares were at one stage down 20%, was also forced to deny it was under financial pressure.

On Wall Street, intensification of worries over the reach of the euro zone debt crisis took some of the comfort out of Tuesday's US Federal Reserve promise to keep interest rates low for another two years.

The Dow Jones industrial average fell 520 points (4.6%) to 10,719.94. The Standard & Poor's 500 Index lost 52 points (4.4%) at 1,120.76. The Nasdaq Composite Index fell 101.47 points (4%) to 2,381.05.

Gold rose almost 3% to another high of $US1,796.86.

Earlier, France's CAC 40 share index fell almost 5.5%, the DAX index in Frankfurt was down more than 5% and the UK's FTSE lost 3%.