Francesco Guerrera, Michael Mackenzie and Nicole Bullock
Financial Times | June 26, 2008

Investors’ fears of a prolonged period of financial turmoil deepened on Thursday as a raft of downgrades for blue-chip companies sent European and US shares into a tailspin.

At the same time, fears for the global economy intensified as crude oil prices broke through $140 for the first time, surging $5.50 on the day to a record $140.05, after Libya threatened to lower production.

Stock markets in Europe and the US fell below lows set in March, when fears of a systemic financial crisis peaked.

The sharp sell-off underlined the markets’ gloomy view of the financial sector amid predictions that banks and brokerages will suffer more large writedowns and be forced to cut dividends and raise more capital.

In Europe, the FTSE Eurofirst 300 fell to its lowest level since November 2005 as concerns over the health of the financial sector were heightened by news that the Belgian-Dutch group Fortis would scrap its dividend and sell shares to raise capital. The FTSE 100 fell 2.6 per cent to 5,518.2, its lowest in nearly three months.

In the US, Citigroup shares sank more than 5 per cent to their lowest level in a decade. But the poor sentiment spread beyond financial stocks, with shares of companies ranging from GM to General Electric and CBS hitting their lowest levels in several years on concerns over high oil prices and sagging consumer demand. GM was particularly hard hit, with its shares sinking to a 53-year low. “The bears are having a field day,” said a Wall St executive. “The markets are being undone by a broad set of fears, ranging from the oil price to the credit squeeze.”

The Dow Jones Industrial Average hit its lowest level since September 2006 in late morning in New York. It was down more than 2 per cent in afternoon trading at 11,548. The S&P 500 was also down more than 2 per cent.

FULL ARTICLE

The Emergency Election Sale is now live! Get 30% to 60% off our most popular products today!