Dubai: Stocks worldwide took another weekend pummelling yesterday as diminishing risk appetite saw investors taking cover in gold and money market instruments.
Currency traders have been moving out of the euro throughout the week because of concerns that strict cost-cutting measures in countries like Greece, Spain and Portugal will slow the continent's economy to a crawl in the coming years. Now stock investors are also looking at those potential long-term problems.
Any significant slowdown in Europe's economy could put a crimp in the US recovery as well. US companies that export to Europe would face weaker demand, hurting their sales and profitability.
Earlier in the week, stocks rose sharply after a nearly $1 trillion rescue package was launched by the European Union and International Monetary Fund in hopes of containing a debt crisis in Greece. However the bailout also calls for deep spending cuts, which investors worry may lead to slower economic growth.
The euro is down to $1.2427. Earlier in the day it dropped to an 18-month low of $1.2424. The euro has dropped more than 6 per cent since the beginning of the month.
Better-than-expected reports on US retail sales and industrial production didn't help stock prices.
Money market funds attracted a year-to-date high of $23.5 billion during the week, according to data collated by EPFR Global. It was the first weekly inflow into these ultra-safe funds since the first week of 2010. US bond funds also took in fresh money and their inflow streak now stands at 61 consecutive weeks.
In mid-morning trading, the Dow Jones industrial average fell 133.77, or 1.2 per cent, to 10,649.18. The Standard & Poor's 500 index lost 17.55, or 1.5 per cent, to 1,139.89, while the Nasdaq composite index fell 45.02, or 1.9 per cent, at 2,349.34.
Financial stocks were also slammed after the New York attorney general launched an investigation into eight Wall Street banks about their dealings in mortgage securities.
European stocks slumped, with the Stoxx Europe 600 Index paring its biggest weekly gain since July, amid mounting concern that the region's debt crisis will hamper economic growth.
