Markets brace for more carnage
Stock markets across the globe are braced for more carnage, with traders expected to ditch shares as fears about the US and eurozone debt crises fester.
World markets slumped last week as traders panicked that the global economy would slide back into recession and the US and the eurozone would be crippled by their debts.
The London market fell by nearly 10% in the week as fearful traders headed for the exit, slashing £150 billion from the UK's top 100 companies. Markets across the world suffered similar pain, and there are fears that the rout will continue this week as markets lack confidence that leaders on both sides of the Atlantic can get to grips with the crisis.
Ratings agency Standard & Poor's stripped the US of its prized AAA credit rating for the first time on Friday. And traders are still worried that Spain and Italy will be unable to pay the interest on their debts and may need a bail-out similar to those handed to Greece, Portugal and Ireland.
Michael Hewson, an analyst at CMC Markets, expects markets to "tank" again this week, and said further losses of between 10% to 15% are possible.
He said: "Sentiment is already feral and there's a lot of fear in the market. We are in unknown territory. The perception has always been that there's nothing safer than the US, but that's gone out of the window now.
"People will sell now and ask questions later."
He added that the eurozone leaders seem incapable of dealing with the problem swiftly and needed to take decisive action to restore confidence to markets.
It has been reported that the European Central Bank could start buying Spanish and Italian bonds to shore up the countries' finances, but Mr Hewson said this would only be a stop-gap measure and would not tackle the root cause of the problem - that they have too much debt.
However, David Miller, a partner at Cheviot Asset Management, was less pessimistic. He said: "On balance the markets are unlikely to go up, but a meltdown is not on the cards."