The meeting between Merkel and Sarkozy on Tuesday tried to return some confidence to the markets, but introducing a transaction fee did no more than peeve the banking industry. The sector has been punished by the peripheral debt crisis in Europe, which spiraled into panic yet again yesterday morning after the Fed announced that it is worried about lenders? liquidity and the possibility that the European debt crisis could spread to the United States.
All that combined with some pessimistic macroeconomic from Wall Street (particularly, IPC and the Philadelphia Fed) and Morgan Stanley?s comments about the United States and Europe sitting on the edge of recession. Markets plunged between 4% and 6.5% across Europe.
The Bank of Europe?s 6.7% decline was fueled by fear of the US Fed?s liquidity and Morgan Stanley?s prediction that global growth will be 1% less than expected.
The Spanish banking sector did not suffer as much (BBVA and Santander lost 5.7% and 4%, respectively), and the Ibex 35 was the least bearish indicator within the Eurozone. It dropped 4.7% to 8,317 points.
Still, after the 23% plunge in the markets since July 21, when the stock markets started to fall just after a major Eurogroup meeting, the index lost its 8,500 technical support yesterday. ?We just saw the last rebound from last week, and it?s possible that the indexes will go back to their annual low points,? said Joan Cabrero, an analyst from Ágora A.F. for Ecotrader. Those levels were 7,966 points for the Ibex 35 and 2,153 points for the EuroStoxx 50.
Yesterday the major Eurozone index dropped 5.3% to 2,206 points, and Ecotrader settled at a low point of 2,269 points. This is not surprising if we consider that since July 21 the index has fallen around 20% because of the bank?s influence.
