Concerns about the viability of French banks saw fear return to Wall St again today as European and US stock markets fell again, driven by a sharp drop in bank shares.
A flight to safety and fear of risk drove investors out of global stocks today as rumours about the health of French banks sparked concern that the euro zone's debt crisis could claim new victims.
French bank stocks tumbled and led European markets lower. US stocks fell more than 3 per cent while safe-haven gold hit another record.
Shares of Societe Generale plummeted as much as 23 per cent before trimming some losses to close almost 15 per cent lower. BNP Paribas ended down 9.5 per cent.
A Societe Generale spokeswoman denied market rumors about the bank. It also asked France's stock market regulator to open an investigation.
The intensification of worries over the reach of the euro zone debt crisis took some of the comfort out of yesterday's promise from the US Federal Reserve to keep interest rates low for at least another two years.
Speculation that France's AAA rating may be at risk initially rattled markets, though the three major agencies reaffirmed the top-tier rating. Standard & Poor's downgraded its AAA credit rating of the United States last week.The MSCI all-country world index was down 1.8 per cent after earlier gains. The FTSEurofirst 300 of leading European shares closed down 4 per cent.
The euro last traded down 1.0 per cent at $1.42310, after sliding to a session low of $1.41620 on trading platform EBS.
It lost 1.4 per cent against the yen to 109.19 yen, after sliding to a roughly five-month low at 108.300.
The benchmark 10-year Treasury note was up 1-2/32 in price after briefly posting a full point gain, its yield falling to 2.12 per cent, down from 2.24 per cent late yesterday.
The 30-year Treasury bond was up 2-4/32 in price to yield 3.52 percent, down from 3.68 per cent at Tuesday's close.
Gold racked up a third record in a row, extending its best rally since 2008. Spot gold rose near 3 per cent to hit a high of $1,796.86.
Agencies