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Global Markets On 'cliff Edge' Amid Fears Over European Banks

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Fears that government austerity packages will hinder global growth have combined with fresh anxiety about the health of European banks to hammer investor confidence.

Shares on both sides of the Atlantic dropped heavily amid warnings that markets were on a "cliff edge".

In jittery trading ahead of a crucial repayment by Europe's banks of a €442bn (£362bn) European Central Bank loan on Thursday the rates at which banks lend to each other in euros rose to their highest levels in eight months as rumours swirled that some banks were finding it difficult to raise funds in the money markets.

The FTSE 100 has now fallen 14% since its April peak after losing 157.46 points to close at 4914.22, a 3% decline on the day and its lowest level since September last year. French and German markets lost about 3%. Wall Street was down 235 points by the time London closed, about 100 points below the 10,000 level.

Analysts will be looking tomorrowfor an indication of whether banks are becoming less reliant on their taxpayer lifeline when the ECB offers a way to refinance the €442bn one-year loan hours before the repayment is due.

If banks ask for more than €300bn to repay their existing loans with the more expensive three-month money being provided by the ECB, then concerns about the health of the banking system will escalate, analysts said.

Spanish finance minister Elena Salgado added to anxiety about the loan repayment by urging the central bank to heed the problems facing some Spanish banks. "The ECB says it doesn't like governments to tell it what to do. I simply say I hope that on this occasion, as in others, the ECB will be aware of the needs of the Spanish financial system," she told Spanish radio.

The publication of European-wide stress tests on major banks in a fortnight was also adding to the nerves while a bigger than expected fall in consumer confidence in the US prompted a debate about whether economies were heading for a double-dip recession. Oil prices fell 3% and the Baltic dry freight index, which measures demand, fell to its lowest level for nine months.

Very bearish for the mainstream press.

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  • 444 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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