World Stock Markets Sink on Fears of U.S. Recession, Health of European Banks

Ongoing fears that the U.S. economy is in trouble has sparked a second day of stock market drops around the globe. On Friday, world stock markets plummeted and U.S. stocks opened lower as investors brace for a possible U.S. recession and express concern over the health of Europe’s banks.

Stocks Plummet around the World

Investors have responded strongly to concerns that the U.S. economy could slip back into another recession and a credit freeze could severely damage Europe’s banks. As of Thursday evening and Friday morning, the following market adjustments have occurred:

• Oil prices dropped to near $79 a barrel in Asia
• Britain’s FTSE 100 dropped 1.8 percent
• Germany’s DAX dropped 3 percent
• France’s CAC-40 sank 2 percent
• Japan’s Nikkei 225 index dropped 2.5 percent to 8,719.24
• Hong Kong’s Hang Seng fell 3.1 percent to 19,399.92

South Korea’s Kopsi index was considered the worst performer in Asia, dropping a staggering 6.2 percent and marking the lowest close in nearly a year. And on the U.S. home front, the Dow dropped 88.09 points, the S&P 500 fell 8.72 points and the Nasdaq dropped 17.68 points at open.

Are the U.S. and Europe in Trouble?

Investors have been worried for weeks that a new recession could hit the U.S. due to an increase in unemployment claims (408,000 claims were filed last week). The 9,000-person increase over the week prior spelled bad news for investors who assume companies and the economy as a whole are in trouble.

In Europe, bank stocks tanked on Thursday thanks to concerns that their exposure to the continent’s debt crisis is having a massive impact. The debt crisis has dragged on for nearly two years and has resulted in a number of sovereign bailouts worth hundreds of billions of euros. Investors worry that this problem could result in a banking credit freeze.

As for calming investors’ fears regarding the U.S. economy, experts say concerns are justified and, unfortunately, as long as unemployment remains high, stocks could continue to suffer.

As for European concerns, Carl Weinburg, an economist at High Frequency Economics, told CNN Money, “There is no solution to the Euroland’s sovereign debt crisis in sight. Markets will continue to be fundamentally unstable and volatile as long as we can think.”