Asian Stocks Drop after Fear Returns to US, Europe Markets

Finance | August 11, 2011, Thursday // 02:57|  views

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Asian stock markets saw declines on Thursday following drops in the USA and Europe Wednesday, with fears that bigger developed economies are increasingly affected by the financial crisis.

Japan's Nikke 225 index fell 1.8% on Thursday, South Korea's Kospi slid 3.8%, and Australia's ASX lost 0.8%, the BBC reported.

The drops in the Asia-Pacific region came after European and US stock markets suffered more large falls, led by steep declines in banking shares. France's Cac share index ended down 5.5%. The UK's FTSE lost 3%, and Wall Street's Dow Jones index lost 4.6%.

After the global stock markets grew on Tuesday and Wednesday following the decision of the US Federal Reserve to pledge near-zero interest rates till 2013, the latest declines have been attributed to rumors that after the USA, France may become the next developed economy to lose its triple A credit ratings.

The French government has denied it would follow the US and lose its top-grade AAA credit rating. This has been confirmed by the three main ratings agencies, Moody's, Standard & Poor's and Fitch.

After an emergency meeting of the French government earlier, President Nicolas Sarkozy promised France would meet its deficit-cutting target "whatever the developments in its economic situation".

One of the major French banks, Societe Generale, whose shares fell up to 20%, has denied it was under financial pressure, amidst speculations that it is in trouble.

The concern regarding Societe Generale and other French banks is about their large exposure to government debt issued by some of the euro zone's weakest states, such as Greece.

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