French debt rating worry hits markets

NEW concerns over France’s debt levels plunged international stock markets downwards again yesterday, despite slightly more positive news beginning to emanate from the US.

Tuesday’s market gains — the first for a week — looked like gaining momentum in early trading yesterday, with the US Federal Reserve’s announcement that it would keep its interest rates at or near zero for two more years going someway to easing investor concerns.

However, early gains were wiped out and markets took another serious nosedive later in the day as speculation rose that France could be the next large economy to lose its triple A debt rating. While that country’s government denied such a move was imminent (President Sarkozy promising new measures to slash the French deficit) and the leading credit rating agencies reaffirmed their top ratings for France, markets closed the day well down on Tuesday’s gains.

The CAC in Paris was down by 5.5% at just over 3,000 points — dragged down by local banking giant Societe Generale; which dropped by 21% at one point following speculation.

Elsewhere, the DAX in Frankfurt slipped by just over 5% and London’s FTSE index fell by 3.1% to just above the 5,000 point mark. There was still some concern hovering amongst US investors as the Dow Jones opened 3% lower than Tuesday’s close and the Nasdaq was down by 2.4%. The Asian markets, meanwhile, kept up their rollercoaster ride of the past week by rising by 1% in Tokyo and 2.3% in Hong Kong.

The 3% recovery seen in Dublin on Tuesday was all but wiped out as the ISEQ finished yesterday down by 56.5 points — or 2.3% — at 2,410 points.