Global stocks and commodities sold off on Thursday as investors dumped risky assets and rushed into safe-havens on fears fiscal tightening is on the rise and will snuff the world's nascent recovery. US stock indexes dropped 3.6 percent or more, with the benchmark Standard & Poor's 500 Index now showing a correction. The index is off 12 percent from its 2010 closing high in April. Also driving anxiety were concerns over a proposed overhaul of US financial regulation, which critics say would reduce banks' capacity to lend and broadly increase borrowing costs. “Uncertainty has people stampeding for the exits,” said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York. The Dow Jones industrial average closed down 376.36 points, or 3.60 percent, to 10,068.01. The Standard & Poor's 500 Index slid 43.46 points, or 3.90 percent, to 1,071.59. The Nasdaq Composite Index lost 94.36 points, or 4.11 percent, to 2,204.01. In Europe, the FTSE 100 index of leading British shares was down 101.74 points, or 2 percent, at 5,056.34 while Germany's DAX slid 140.31 points, or 2.3 percent, to 5,848.36. The CAC-40 in France was 102.60 points, or 2.9 percent, lower at 3,409.07. The European debt crisis continues to be the main point of interest in the markets and fears are growing that it may prove to be the catalyst to a renewed downturn in global growth, if not an outright slide back into recession-while stocks tank, oil prices have slid below $70 a barrel but US Treasuries have surged. Further weighing on sentiment was the news that new claims for unemployment benefits in the US rose by 25,000 to a three-month high of 471,000-the consensus in the markets was for a modest fall to 440,000. The worry is that high unemployment in the US will act as a drag on the recovery. “The increase in claims has triggered double-dip (recession) fears,” said Neil Mackinnon, global macro strategist at VTB Capital. Thursday had started off fairly calmly, particularly in Europe, but investors clearly remain spooked by Tuesday's decision by Germany's regulator to ban so-called naked short-selling of euro zone government bonds and shares in ten key German financial institutions until March 31. In a typical short sale, a trader sells borrowed shares in hopes of buying them cheaper later and profiting on the difference. A “naked” short is when traders sell shares without borrowing them first. It's one way of betting a financial asset will fall in value. Investors were unsettled partly because Germany's move against the practice was unilateral without any consultation with its partners in the euro zone, and suggested to some an uncoordinated policy response. David Buik, markets analyst at BGC Partners, said the German move left the market in “a vortex of horrific uncertainty; that being the case, equity and foreign exchange market luminaries will eke every drop out of the situation in as vituperative manner as possible.” In the currency markets, the euro was down 0.8 percent on the day at $1.2323. However, that's still way up from the four-year low of $1.2146 recorded Wednesday in the wake of the German ban. Earlier, Asian stock markets dropped in the wake of Wednesday's declines in Europe and the US Renewed tensions between North Korea and South Korea did not help nor did unrest on the streets of Bangkok. Japan's benchmark Nikkei 225 stock average dropped 1.5 percent to 10,030.31 after the government said the economy grew 4.9 percent in the first quarter, less than analysts expected. Australia's main index fell 1.6 percent to 4316.50 while shares in Shanghai, Hong Kong and Indonesia also fell. Singapore's benchmark index fell 0.8 percent despite strong first quarter economic growth. The government said Thursday that Singapore's gross domestic product jumped 16 percent from a year earlier. South Korea's Kospi index fell 1.8 percent to 1,600.18 after the government announced that an investigation showed overwhelmingly that North Korea fired a torpedo that sank the Cheonan warship and killed 46 sailors. Thailand's stock market was closed Thursday after a confrontation between the army and anti-government protesters sparked rioting and arson in Bangkok. The exchange was one of the building's torched by rioters but damage was largely limited to ground floor.
