The US equity markets ended sharply lower on Friday on fears that German may default on its debt. Resignation of the top German official at the European Central Bank in protest of the bank's bond-buying program too added fuel to the fire.
The Dow Jones Industrial Average fell 303.68 points or 2.69%, to close at 10,992.13. The NASDAQ Composite dropped 61.15 points or 2.42%, to end at 2,467.99. The Standard and Poor's 500 Index slipped 31.67 points or 2.67%, to settle at 1,154.23.
ECB Executive Board member Juergen Stark will step down from his post by the end of the year, the bank said on Friday. Two sources told Reuters Stark's resignation, which comes almost three years before his term is due to expire, was because of a conflict over the central bank's controversial program of buying up sovereign bonds to help hold down borrowing costs in some debt-strapped euro zone members.
"The ECB is critical in dealing with and potentially solving the sovereign debt issue, so when you get a new story like this, that there's internal turmoil in the ECB, that immediately has implications for the bond-buying program, which immediately has implications on the capital level in European banks," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
Terrorism threats against New York City and Washington just ahead of the 10th anniversary of the September 11 attacks also prompted investors to sell equities ahead of the weekend.
At a meeting of Group of Seven finance chiefs being held in France, US Treasury Secretary Timothy Geithner on Friday pressed Europe's strongest economies to give "unequivocal" financial support to weaker euro zone states to overcome a debt crisis that threatens the world economy.
Investors remained skeptical about how much of President Barack Obama's USD 447 billion proposal to generate US jobs would make it through Congress. Obama on Thursday night challenged Congress to enact tax cuts and new spending to revive a stalled job market, but he faces an uphill fight to win over Republicans.
Among largecaps, McDonald's fell 4% to USD 85.03 and Bank of America tumbled 3% to USD 6.98.
Yahoo gained 0.28% to USD 14.48 and Texas Instruments slipped 1% to USD 26.08.
On the economic front, the Commerce Department said wholesale inventories rose 0.8% in July to a seasonally adjusted USD 462.41 billion. It gained 0.6% in June.
Among the European markets, Britain's FTSE fell 2.35%, Germany's DAX lost 4.04% and France's CAC dropped 3.60% at close.
Source: www.moneycontrol.com
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