Stock markets tread water after dire day of heavy losses

EUROPEAN STOCK MARKETS opened strongly this morning after recording some of their biggest one-day losses of recent times, but have since slipped back as investors remain nervous about the onset of a second global recession.

Markets in London, Paris and Frankfurt all opened strongly this morning, having lost around 5 per cent in a torrid day of trading yesterday, but quickly reversed these gains as investors remained uneasy about the immediate future.

The ISEQ Index on the Dublin stock exchange opened up by 0.4 per cent this morning, though immediately fell back by about half this amount.

Asian and European markets had plunged yesterday as traders absorbed the Federal Reserve’s bleak assessment of the US economy. The Fed had said that the US economy was vulnerable to major risks, including from unstable financial markets.

Bad economic news from Asia and Europe also pushed people to sell riskier investments that typically gain value during periods of growth. HSBC’s index of Chinese manufacturing showed that factories there have slowed in September.

Markets in China and India closed down more than 4 per cent as traders questioned whether emerging economies will remain strong if developed nations enter recession.

US shares followed the trend set in Europe, with indexes sliding more than 3 per cent by mid-morning.

Money flooded into currencies that are seen as safe, stable bets — the dollar, Japanese yen and Swiss franc. The euro was this morning trading at $1.3544.

Additional reporting by AP

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