Markets Swap Extreme Risk Aversion for Caution

Source:

http://www.cnbc.com/id/44029734?__source=yahoo|headline|quote|text|&par=yahoo

By: CNBC.com with Reuters

Following Thursday’s dramatic 500-point fall in the Dow and losses overnight across Asia Europe’s main stock markets opened sharply lower on Friday but recovered some of their losses one hour into the trading day. 

The FTSE[.FTSE  5271.52    -121.62  (-2.26%)   ], the DAX [.GDAXI  6267.56    -147.20 (-2.29%)   ] and the CAC 40 [.FCHI  3288.75    -31.60  (-0.95%)   ] were all more than 2 percent lower at the open.

Thursday’s losses on the Dow where the biggest in a single session since late 2008 as investors took fright at the debt crisis in the euro zone, signs of growth slowing sharply and attempts by Japan and Switzerland to drive their currencies lower.

Later Friday, Angela Merkel, Nicolas Sarkozy and Spanish Prime Minister Jose Luis Rodriguez Zapatero are expected to hold a conference call later today to discuss the crisis in the euro zone following a warning from European Commission President Jose-Manuel Barroso for a bigger rescue fund, a call which was immediately rebuffed by Germany.

On Thursday Jean-Claude Trichet told CNBC that “Governments have enormous responsibilities. We have been constant ourselves in our calls to governments…to be up to their responsibilities. At certain moments we had benign neglect of governments, benign neglect of the markets, and benign neglect of mainstream economists.”

The assertion in that interview that the euro was in a stronger position that the US or Japan doing little to calm investor fears.

Ahead of Friday’s US jobs data there will be a number of things for investors to focus on.

Royal Bank of Scotland shares plunged more than 20 percent lower after a disappointing earnings report.

Barclays stumbled 7 percent, while Lloyd’s TSB lost 6 percent.

Shares in Italy’s top two banks, Intesa Sanpaolo and UniCredit were suspended from trading shortly after opening sharply lower on Friday, as yields on Italian government bonds rose to new record highs.

At 11:00am CET we get Italian GDP data.

Tune in for live programming on CNBC. We have reporters on the ground in Rome, Milan and Madrid and will be joined by Tidjane Thiam, the CEO of insurance giant Prudential as the group posts earnings at 8:00am CET.

– Reuters contributed to this report.

What happened around the globe:

Global stock markets tumbled Friday amid fears the U.S. may be heading back into recession and Europe’s debt crisis is worsening. The sell-off follows the biggest one-day points decline on Wall Street since the 2008 financial crisis.

…

In Europe, major markets fell, adding to losses Thursday. London’s FTSE 100 declined 3.5 percent to 5,393.14 and Germany’s DAX shed 3.8 percent to 6,172.00. France’s CAC-40 lost 2.5 percent to 3,238.80.

Japan’s Nikkei 225 stock average slid 3.7 percent to 9,299.88 and Hong Kong’s Hang Seng dived 4.6 percent to 20,877.74. China’s Shanghai Composite Index lost 2.2 percent to 2,626.42.

…

The Dow closed Thursday down 512.76 points, at 11,383.68. It was the steepest point decline since Dec. 1, 2008.

Thursday’s decline was the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.