Inaction in Europe causes US stock slump

NEW YORK—European leaders  yesterday gamely promised to keep tackling the continent’s debt crisis. But the markets wanted much more. Stocks sank across the US and Europe, the euro fell against the dollar and investors dumped bonds issued by the governments of Spain and Italy. Investors had been expecting more immediate action from the European Central Bank and were disappointed by the plan’s lack of details, especially considering the ECB president’s pledge last week to do “whatever it takes” to keep the euro intact.

 

 

A week later, investors’ response was more like: “whatever.” It was the second day in a row that markets were disappointed by a lack of decisive action from a major central bank. On Wednesday, stocks closed lower after the Federal Reserve made only vague promises about its plans for trying to revive the US economy. The Dow Jones industrial average fell 92.18 points to 12,878.88. The Dow had been down as much as 192 shortly after noon. The Standard & Poor’s 500 index fell 10.32 to 1,365. The Nasdaq composite index lost 10.44 to 2,909.77. Investors had been hoping for clear action from the ECB, such as a cut in interest rates or clear plans to buy more European government bonds, which could lower borrowing costs for troubled countries like Spain and Italy. The yield, or interest rate, on Spain’s benchmark ten-year bond jumped to 7.06 per cent from 6.68 per cent late Wednesday, making it more expensive for the country to borrow money. (AP)