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European shares down after sharp falls in Asia European shares down after sharp falls in Asia
(40 minutes later)
European share values have fallen further after a volatile session on Asian markets. European share values have dropped further after big falls on US and Asian markets.
London's FTSE 100 share index and Frankfurt's Dax index rose at first before falling back sharply. London's FTSE share index and Frankfurt's Dax index rose at first before falling back sharply.
The FTSE 100 index is down 4.1%, the Dax is down 5.7% and France's Cac is down by 2.4%.
Traders remain on edge after a severe loss of confidence caused by a downgrading of US debt and further strife in the eurozone.Traders remain on edge after a severe loss of confidence caused by a downgrading of US debt and further strife in the eurozone.
Despite that, the yield on Spanish and Italian government bonds both fell further. Despite that, the yield on both Spanish and Italian government bonds fell further.
The European Central Bank (ECB) is intervening in the markets to try to keep the cost of borrowing down for the two countries, which are struggling to avoid a Greece-style bail-out by the authorities.The European Central Bank (ECB) is intervening in the markets to try to keep the cost of borrowing down for the two countries, which are struggling to avoid a Greece-style bail-out by the authorities.
Earlier, Asian markets had recovered around half of their overnight losses by the close. Worries about the level of US debt caused its credit rating to be downgraded from the top triple A grade - a move that lead to severe falls on Monday of between 3%-5% for European share markets and a 5.6% fall for the US Dow Jones index - its biggest in three years.
On Tuesday, Asian markets suffered their second day of steep falls, although they had recovered around half of their overnight losses by the close.
The Nikkei finished down 1.7%, South Korea's Kospi down 3.64%, and Hong Kong's Hang Seng down 2.8%.The Nikkei finished down 1.7%, South Korea's Kospi down 3.64%, and Hong Kong's Hang Seng down 2.8%.
'No way out' 'No way out'
The Asian trading day began with sharp falls after the Dow Jones index in the US dropped 5.6% in Monday trading, despite US President Barack Obama trying to reassure investors. Alan Brown, chief investment officer of Schroders, told the BBC that investors could see no way out of the current troubles.
Alan Brown, chief investment officer of Schroders, told BBC News investors could see no way out of the current troubles: "The underlying story is all of the weak economic data that we've seen across the eurozone and the UK and the US over the past several weeks. "The underlying story is all of the weak economic data that we've seen across the eurozone and the UK and the US over the past several weeks," he said.
"I think that investors are recognising that the authorities have very few policy levers left. They have exhausted fiscal options, interest rates in most places are at rock bottom.That is why markets are very nervous." "I think that investors are recognising that the authorities have very few policy levers left. They have exhausted fiscal options, interest rates in most places are at rock bottom. That is why markets are very nervous."
Peter Esho, chief market analyst at City Index, told the BBC: "You can't control it. You have the onset of fear in the market. There are a lot of things that don't make sense."Peter Esho, chief market analyst at City Index, told the BBC: "You can't control it. You have the onset of fear in the market. There are a lot of things that don't make sense."
But Mr Brown said the ECB's moves to support Spain and Italy were "potentially very helpful".But Mr Brown said the ECB's moves to support Spain and Italy were "potentially very helpful".
"If they are able to keep a lid on yields in Italy and Spain then they will succeed in stopping the markets creating their own reality whereby they drive yields on Italian and Spanish debt to levels which would cause solvency problems in those countries.""If they are able to keep a lid on yields in Italy and Spain then they will succeed in stopping the markets creating their own reality whereby they drive yields on Italian and Spanish debt to levels which would cause solvency problems in those countries."
Rocking market
A number of issues have created the current market pessimism.
At the heart of the sell-off is the fear that ongoing debt problems in the US and Europe will slow economic growth and dent corporate profits.
On top of that, on Friday the US had its triple A credit rating cut by Standard and Poor's for the first time in history, adding to the sense of gloom surrounding the world's biggest economy.
"What's rocking the market is a growth scare," said Kathleen Gaffney of Loomis Sayles."What's rocking the market is a growth scare," said Kathleen Gaffney of Loomis Sayles.
She said investors were concerned about "how Europe and the US are going to work their way out of a high debt burden" if the global economy slows.She said investors were concerned about "how Europe and the US are going to work their way out of a high debt burden" if the global economy slows.
With this in mind, other asset classes were also impacted on Tuesday. Crude oil prices continued to slide amid concerns that demand would wane in coming months. Other assets were also affected on Tuesday. Crude oil prices continued to slide amid concerns that if the economy did slow down, demand would wane in coming months.
Brent crude fell to a six-month low before rebounding to $103.31 a barrel. Brent crude fell to a six-month low below $100 a barrel before rebounding to $103.31.
Gold, meanwhile, hit another new record of $1,771 as investors looked for assets that are considered to be less risky. The Swiss franc also gained. However, gold hit another new record of $1,771 an ounce as investors looked for assets that are considered to be less risky. The Swiss franc also gained.
Not immune
Analysts said that while economies in Asia had been growing robustly and the outlook for the region remained positive, a slowdown in the US and Europe could hurt growth significantly. Not least because the stock market slump may put off consumer and corporate spending.
"When you see such significant falls, Asia cannot distance itself completely," said City Index's Mr Esho.
Analysts said that Asian economies may now have to revise their own economic projections as a result. On Monday, Singapore cut its growth forecast for this year to between 5-6%, down from 5-7%.
"The discussion now in Asia is to have a look at growth assumptions and perhaps even to revise numbers that could be a little too optimistic in light of what is happening in the markets," said City Index's Mr Esho.
Broad sell-off
Investors have been dumping stocks across all industries in the US and Asia.
The S&P 500 index was down 6.7% in New York on Monday, the worst drop since December 2008, with every listed stock falling.
In points terms, the Dow ended down 635 to 10,810, its biggest one-day decline since October 2008, and the sixth largest on record. The Nasdaq index fell even further, losing 6.9%.
Earlier in the UK, the main FTSE 100 index lost 3.4%, or 178 points. It was the first time in the FTSE 100's 27-year history that it had fallen by more than 100 points for four sessions in a row.
Share indexes also fell heavily across Europe on Monday, with Germany's Dax ending down 5%, while France's Cac lost 4.7%.
Do you work in the financial sector? What is your reaction to the share sell-off? You can send us your comments using the form below.Do you work in the financial sector? What is your reaction to the share sell-off? You can send us your comments using the form below.