By Michele Maatouk
European stocks opened sharply lower Friday following the heavy selloff in the U.S. and Asia, amid growing concerns about euro-zone sovereign debt and the U.S. recovery, and ahead of the release of nonfarm payrolls.
London’s FTSE 100 Index fell 2.5%, Frankfurt’s DAX shed 2%, Paris’s CAC-40 Index dropped 2.6% and Milan’s FTSE-MIB lost 3.5%.
In Europe, fears are mounting that debt troubles have spread beyond Greece and Ireland to the larger economies of Italy and Spain, and Thursday’s European Central Bank press conference did little to alleviate those concerns. While market participants welcomed the bank’s decision to resume its bond-buying, “spreads continued to widen because there was not unanimity on the governing council over the Securities Market Program purchases and the strategy seems to be to try and ease the pressure on Italy and Spain by buying in other markets rather than those two directly,” noted BNP Paribas. The ECB intervened in the secondary market to buy Portuguese and Irish sovereign bonds, but not Italian and Spanish bonds.
Meanwhile, worries remain about the health of the U.S. economy following a raft of less-than-inspiring data releases and ahead of the all-important nonfarm payrolls release later. Newedge said the data are expected to show a 85,000 gain in July, after just 18,000 jobs were added in June, while the unemployment rate is estimated at 9.1% from 9.2% in June.
“Recent hard data suggested that the U.S. economy is still running well below potential and the slack in activity will leave the unemployment rate at elevated levels for a prolonged period of time,” Newedge said.
The nonfarm payrolls and unemployment rate are due at 8:30 a.m. ET. Ahead of that, U.K. producer-price index is at 4:30 a.m. and German industrial production is at 6 a.m.
On Wall Street Thursday, stocks plunged, driving the Dow Jones Industrial Average to close down more than 500 points. The Dow finished just off session lows with a 512.76-point decline, or 4.3% to 11383.68, erasing all its gains for 2011. The Standard & Poor’s 500-stock index fell 4.8% to 1200.07 and the Nasdaq slumped 136.68 points, or 5.1%, to 2556.39, also in the red for the year.
In Asia, shares succumbed to heavy selling. Underscoring the global gloom, Australia’s central bank cut its forecast for economic growth in 2011, although it noted that inflation—a perennial policy headache in much of Asia—would remain a persistent worry for some years.
Regional stock markets were hammered after steep losses on Wall Street Thursday. Japan’s Nikkei Stock Average tumbled 3.8%, after hitting its lowest level since March 18, and Australia’s S&P/ASX 200 lost 4.3%, after touching a two-year low. South Korea’s Kospi Composite fell 3.8%, Hong Kong’s Hang Seng Index slumped 4.8%, after tapping an 11-month low earlier, and the Shanghai Composite Index slid 1.9%.
In the foreign exchanges, the euro was trading at $1.4113, from $1.4093 late Thursday in New York, while the dollar was at ¥78.58 from ¥78.87.
Among commodities, spot gold was at $1,662.20 a troy ounce, up $12.20 from New York, while September Nymex crude-oil futures were down $1.24 cents at $85.39 a barrel. In the bond markets, the September bund futures contract was up 0.48 at 133.27.
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